Chapter 3 Conclusion
If you loaned your brother-in-law a thousand dollars, under the agreement
that he would pay you back $50 a month for 20 months, you’d be upset
if he didn’t pay you one month. You’d be really upset if he didn’t
pay you for two months. In fact, it might cause all kinds of family disharmony.
Professional money lenders feel pretty much the same way, aside from the
family strife.
If you don’t pay your credit card bill on time one month, you’ll
get smacked with a late fee and possibly other penalties.
You also may hurt your credit score—particularly if you get two months
behind in payments.
In some cases, you aren’t just late in making payments. You’re
not making payments at all. Then, the loan is considered in default—and
your creditor likely will send it to a collection agency to try and get you
to make good on your debt.
Once a creditor completely gives up getting repaid by you, the company writes
off your debt on its taxes, and your account is considered a charge-off.
We’ll consider these black marks in greater detail later. For now,
it’s enough to say that lenders share information about their customers
with other lenders to help reduce the risk of future defaults and charge-offs.
Most credit card issuers prefer to lend money to someone who has demonstrated
a history of paying his or her bills on time. On-time payments make the complex
system run a little more smoothly.
Next: Chapter
4 - Choosing a Credit Card |
