Credit Basics
Digging into Debt
What would happen if you said yes to all those credit card
offers that come in the mail?
Jeff Wuorio found out.
For as long as I can remember, I've been hiking out to my family's mailbox at the end of our country road in Maine, collecting the credit card solicitations we get each day. Then I stop by the garbage cans and--ignoring the pleas not to pass up these incredible offers--tear the letters in two and toss them on top of the potato peels.
But recently I decided to try something new. What would happen, I wondered, if I accepted all those direct-mail offers for credit cards and home-equity credit lines--as well as any that came by phone? After all, if these lenders were so hot to give me credit, who was I not to accept such largesse? So, over the course of one month, I sent back every application with check mark next to the YES!
What happened was pretty frightening. Read my daily debt diary, and you'll learn how quickly and easily you can become a credit card addict.
Day 1 and 2 No letters inviting my wife or me to take on debt. All of a sudden we're pariahs?
Day 3 At last! An "invitation" from Providian for a Visa Platinum card with a 2.9 percentage rate (known as an annual percentage rate or APR). It promises me a credit line as high as $25,000, and the introductory period for the low interest rate lasts five months. After that, it shoots up to 13.99 percent! I fill out the application anyway and mail it back.
Day 9 I get a check from my current credit card company offering me a $5,500 cash advance because I'm "such a good customer."
Day 13 Peoples Heritage calls to flog a 2.9 percent Platinum Master Card. I say, "Sure!" and sign up.
Day 14 A twofer. MBNA telephones and offers another 2.9 percent Platinum MasterCard. I say go ahead. Also, I get an invitation in the mail from American Express to take its Gold Corporate Card; I accept.
Day 18 through 22 I go on vacation. Upon returning, I find two invitations: Citibank has a Platinum Select MasterCard with a 1.9 percent rate for nine months; no telling what the rate will be after that. And AT&T has sent me a 1.9 percent Universal Platinum MasterCard application--with a $100 gift, no less.
Both cards are touted as money savers. They allow me to transfer big balances from my current, high-interest cards to those low-interest ones. I have to read the fine print to learn that the low rate applies only to purchases I've already made. The rate is 13.99 percent for any new purchases. Nevertheless, I call Citibank and apply over the phone. I mail in the AT&T card application too.
Day 24 I get an application from Capital One for a 3.9 percent Designer Visa card with a $2,000 credit limit and my choice of seven groovy check designs. I go with the tie-dye.
Day 27 Two cards I signed up for arrive in the mail: the Peoples Heritage Platinum MasterCard with a $15,000 credit limit and the Providian Visa Platinum with a $5,000 limit.
Day 30 I get my American Express Gold Corporate Card. There's no mention of a credit limit, so I call American Express. I'm told if I pay my balance every month, there is no preset spending limit. I suddenly feel dizzy...
Early the next month A reality check. I get a letter back from AT&T rejecting my application, saying that my credit report reveals "excessive revolving credit utilization." This has never happened to me before, but I'm glad it did this time. A few days later, however, I get the Capital One Visa card and the tie-dye checks. Still, someone there-or maybe one of Capital One's computers-must have noticed that I've been accepting a lot of credit offers, because this card comes with a paltry $200 credit limit, even though the original offer promised a credit limit of $2,000. Two more days pass, and I receive my MBNA Platinum MasterCard with a $5,500 credit limit. That's more like it! this wraps up my month of debt demolition derby. Seven solicitations, five approvals, and a check for a cash advance. Total specified credit limit: $32,500. But because the American Express card doesn't have a preset limit, I'm really free to charge any amount I want.
With my experiment over, I try to find out what's going on behind the scenes and what damage I may have done to my credit record. I call AT&T and am told I was rejected due to "excessive" credit card balances. This comes into sharper focus when I call Capital One to ask for an increase in its $200 limit and get turned down because, according to a service rep, I now have $80,000 worth of open credit.
Next, I try to cancel all the cards. For the most part, this is easy. But some lenders don't want to take "no, thanks" for an answer. Less than ten minutes after a Capital One rep turned me down for a credit increase, another Capital One operator offers to boost my credit limit to $500 when I call to cancel. An American Express operator almost seems to take my desire to cancel as a personal affront. "I just don't understand why you're canceling," she says no fewer than six times. When I insist, she barrels through a series of questions hoping to sway me--I answer with lies just to get her off my back. ("Do you ever eat out?" "Gosh, never.") After ten minutes, with a sigh that resonates over the phone, she says the account is closed, leaving me feeling vaguely guilty.
During the next couple of weeks, I receive six new credit car applications. Pretty strange for a guy who's just be swatted down.
Had I timed my test differently, things could have turned out far worse. Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Florida, says it usually takes about 30 days for a credit card company to get information on a prospective customer. So had I applied for all the credit cards at the same time, all the lenders might have approved me before learning I'd become a debt junkie.
