Friday, January 20, 2012

Retailers and Businesses

Companies that sell on credit understand that they will not receive every payment in full. Bad debts are estimated during the accounting term and are a part of the reality of credit cards for businesses. However, a retailer is not going to waste their resources on chasing down every individual person who is in debt and hammer them to recover some of the debt. They will do this to an extent, but after some time, it is far easier to hand pass the debt on. They can just as easily sell the payments that they are owed. Credit collection agencies are the notorious companies that harass debtors into payments, bombarding them with mailings and phone calls. By selling these debts at a percentage of what can be recovered and paying a premium, after accumulating what they can, retailers and businesses no longer need to worry about the credit.

While I do believe that debtors should be held to some degree of responsibility for their actions, these agencies take it to another level. The are no standards and no exceptions (http://www.youtube.com/watch?v=FZjSNJ17GMU).

This is the next step in understanding how the credit card system operates. If the retailers were suffering losses and hemorrhaging money, credit card restrictions would be much tighter and strict. However, since an entire system of companies exists to purchase and remove this debt from the retailers, the retailers are no longer the safety valve on who can have a credit card. As far as they are concerned, if you have a valid credit card, you have potential. The debt collectors are efficient enough to turn a substantial profit on the bad debts purchased from the retailers, and the amount paid to the retailers is profitable enough for them to not care who is making purchases with credit cards. All the while, interest is piling up.

Apply this to yourself. You will be sold things you can't afford. If you can pay, great. If you can't, there is an entire finance system developed to squeeze every possible cent out of you while lumping on high interest and fees. Either way, they win. With this system in place, why have tight restrictions on who can have credit cards? They don't have to, which is why they would love to give you one.

4 comments:

  1. Thanks for sharing! Great post! Following.

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  2. i like your blog :)

    Following.

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  3. nice, thanks for the advice...
    following ;)

    ReplyDelete