There’s a lot to consider when you sign up for credit cards. You need to look at the interest rate, any awards or points you may rack up while using it, and of course the balances and cash limits you’ll be given. But have you ever thought of where you’re getting that credit card from? If it’s from the wrong place, you could be asking for financial trouble.
As you undoubtedly know, you can get a credit card from just about anywhere. Representatives from credit card companies line college campuses (especially first thing in the fall,) and you can walk into any Money Mart and sign up for a prepaid credit card. They’re available in grocery stores, and you could even go the old-fashioned route of just calling a credit card company and asking if you can sign up for a card. All of these options are perfectly fine (if you still always consider the risks of carrying a credit card.) But what’s the one place you should never get a credit card from?
It seems so easy to sign up for a credit card with your bank. They usually have a full line of Visas or Mastercards that you can choose from, each with their own rates and signup fees, and those packages may seem very attractive to you. And the fact that you can sign up right at your bank? Even more convenient, right? Wrong. Because it’s not what happens when you sign up for your card that matters, but rather what happens if you don’t pay off that balance every month.
If you get into a bit of trouble with a credit card that you got from any one of the places talked about earlier, the most trouble you’ll be in is that you’ll add even more interest onto your total balance, and there will probably be some sort of penalty or fee from the company for your late payment. You may not even be able to use your credit card anymore. But if you sign up with a third-party company for your card, this is the worst that will happen. If you get a card from your bank and don’t pay however, they could freeze all your money they have control over.
This is a problem many people face when getting a credit card from their bank. They miss a payment or two and suddenly, their entire bank account is frozen. They may even get a message on the phone or online about how these accounts will remain frozen until their credit card is paid off. And the first question those users always have is: is this legal?
It is. If your bank has issued you your credit card and you don’t pay it, they can actually freeze any savings, chequing, or even investment accounts that you have with them. And worse, there’s little you can do about it except pay off that balance. Only then will your accounts be unfrozen.
It does seem like the easy and convenient thing to do, getting a credit card from the same place where you bank. However, this is a case of giving too much control over to one company. And when that company already has some control over your cash, you don’t want to give them so much control that they can freeze that cash. Instead, get a credit card from a third-party and keep some of that control for yourself.