Don't Settle

The New York Times had a strange article in today's edition about credit card companies beginning to aggressively settle with defaulted accountholders. Basically, if you're severely delinquent on your credit card balance, at some point the credit card company gives up on getting you to pay the full balance. That leaves them with few options: sue to possess your assets or settle for whatever you are willing to pay.

The article celebrates that, due to the severe recession, credit card companies are increasingly choosing the second option. The article is written with a sort of tone as if to say: you too can settle with your credit card company and get out of half of your debt! Isn't that great?

I don't think it is. For starters, I find it absolutely bizarre that the guy they feature is almost gloating that he failed to pay half his credit card balance and get away with it. In the picture, he has a sort of smug grin on his face as he sits in an expensive looking rocking chair (which may have been free if it was part of the half of his credit card balance he neglected to pay). He seems to be very pleased to have stuck it to The Man.

But what's worse is that the article entirely fails to explain that it is generally a bad idea to settle with a credit card company. Sure, it might be better than some other alternatives, like getting sued and losing. But a settlement is reflected in your credit history and represents a pretty ugly blemish on your credit report. Although it's hard to tell how many points on your credit score that might knock off, for years it will appear as a red flag on your credit report whenever you apply for a loan, lease an apartment or get a new credit card. I would strongly advise against settling -- try to first work it out through credit counseling or some other measure.

I'm not sure what's wrong with the world when people are gloating about not paying their bills. Shunning obligations and responsibility seems like a pretty tragic thing to become cool or trendy. I certainly hope articles like the one in the Times don't have that effect. But without disclosing the pitfalls associated with such behavior, I guess anything can happen