Bankruptcy

Charge (not so) Smart

By Bill McLeod, Esq.

Housing Wire reports that there is a new company that will allow consumers to use their credit cards to pay their mortgage payments.

?Our offering is perfect for the individual who may experience an unexpected lifestyle change such as a temporary income interruption or fluctuation,? said Mitch Friedman, co-founder of ChargeSmart, ?or for the savvy consumer who wants to earn rewards for the ease of using his or her credit card for payment.?

Experience an unexpected lifestyle change such as a temporary income fluctuation? Perhaps for someone who just got fired but will land on their feet by the time the next month?s mortgage payment is due, but seems a bit unlikely. This has ?bad idea? written all over it, and I?m not alone:

A source at a credit counseling agency that asked not to be named in this story said such a service could possibly work well for some troubled borrowers, provided that ?using the charge card is only a temporary bridge into a more complete debt management program that doesn?t rely on consumer credit.?

?But using a service like this to shift unpaid debts around can be a very dangerous move,? she cautioned. ?It can pile more debt up over existing debt.?

Others scoffed at the idea, and said ChargeSmart was merely looking to take advantage of borrowers facing their last rope.

?You can?t tell me that a good credit risk is going to pay 2 or more percent for the privilege of putting their mortgage onto their Visa,? said one bank executive, who asked not to be identified. ?This is a service that is going to pull in troubled borrowers looking to make just one more mortgage payment before defaulting on both secured and unsecured debts.?

It might also help feed the denial I have written about. ChargeSmart seems like anything but that. If you think you need to use a credit card to make a mortgage payment, it?s time to rethink your financial strategies. And frankly, it may be time to start thinking about contacting me.

Full post as published by McLeod Law Offices on July 09, 2008 (boomark / email).