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Sweet words: ‘Due to inactivity on your account we are canceling your card’

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POSTED May 9, 2009 1:04 a.m.
Shortly after I turned 18 I got my first two credit cards from Mervyn’s and Chevron.

They were simply for convenience although there were times I stretched my Mervyn’s payments over three months.

Then came the bank cards that were essential for a photography business I had on the side. They also were perfect when traveling. Then – like most people I suppose – I started using credit cards to purchase items in advance of having the money always figuring that when the money for a particular job came in I’d simply pay it off. Inadvertently something else came up and the balance grew.

There was also a time I literally had my salary slashed by a third just three months after buying a home. Those cards came in mighty handy while I scrambled to earn extra money from officiating basketball and softball plus freelance work.

In no time at all my unsecured debt was pushing $20,000. I always made payments much larger than the minimum but even with trying to be as aggressive as possible paying down the debt I always seemed to have four or so years to go at the current payment level to get rid of it. Something, of course, always came up. A small emergency, forgetting to go to the bank before eating out, and the old “it’s only $20 so I’ll just put it on the card and add to the payment” routine which inadvertently you always found another use for the money before you wrote the monthly payment which meant you didn’t bump it up.

I had excellent credit and was able to get unsecured consolidation loans as I juggled the debt.

Eventually it took a major life changing event – a divorce – that produced the revenue from the sale of the home that wiped the slate clean.

After that point, I vowed never to open another credit card unless it was to spread the cost of a large item such as appliances over a few months with no interest so I wouldn’t have to deplete reserves in my checking account to pay for it up front.

For the past five years, I’ve essentially not used a credit card except on the occasions it was needed to secure a rental vehicle or when I traveled to Death Valley, Mt. Whitney, or some other multiple-day trip when I didn’t want to carry a lot of money plus had to secure hotel reservations.

I’m not exactly rolling in the dough but I’m not complaining. I’ve taken my hits like everyone else including having 20 shares of Washington Mutual stock reduced to less than the value of a postage stamp.  I suspect I’m like a lot of folks as I don’t have the wherewithal financially by having cash to cover the recommended full six months of expenses readily available.

There was always, however, credit cards and lines of credit to fall back on.

That option is slowly fading as banks are shedding inactive credit cards that don’t see activity for a year to two years. Your credit limit is essentially a debt the bank has even if you have a zero balance. If you have a $12,000 maximum credit line the bank has to commit funds to cover that as much as they do a traditional loan.

Banks need to generate money. I’m not using the cards. Between the two of them there was $26,000 in available credit. That represented a $26,000 obligation 24/7 for them as I could go out any day and charge that much. As such, my credit line and not what I owed even if it is nothing shows up on their balance sheet and works against banks especially as the money supply contracts.

That leaves me with one bank credit card – Capital One. My interest, of course, is no longer 6.9 percent.

I will have to use it for something – and then pay it off – to keep it active after a conversation the other day with a customer representative whose English was more difficult to understand than my own. If not, it is going to become a royal pain to travel especially if I have to secure reservations.

Not using credit cards has been a great feeling but for the past 35 years they have always been there “just in case.”

It’s a brave new world – thank goodness – where many consumers as well as banks are rethinking the price of having credit cards and what they do to their respective balance sheets.
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