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Unsecured debt is not really so unsecured

For many consumers, credit card debt is part of being an American. Despite our sometimes casual attitude about the credit card debt, it can actually be very serious. This is especially true when our credit card bills start to exceed our ability to pay. In fact, some Tennessee credit card holders might find it surprising, but many credit card agreements actually allow lenders to collect outstanding debts through repossession.

According to a recent study of credit card agreements, many credit cards, including credit cards offered by some big-name stores, allow lenders to repossess items purchased with the card if the consumer does not pay. While repossession is not unheard of, it might surprise credit card holders because credit card debt is generally described as "unsecured debt." Unsecured debt is supposed to be debt which is not backed by property.

As of late 2013, however, more and more credit cards, more than 200 in fact, give banks a security interest in the property consumers purchased on their cards. A few of the big name cards now including this provision include Capital One backed credit cards for stores like Costco, Big Lots and Guitar Center, as well as general purpose credit cards issued by large national financial institutions like Well's Fargo Financial.

Financial intuitions that offer credit cards generally defend the high-interest rates that these cards carry by pointing to the fact that the debt is unsecured and therefore the intuitions are taking a larger risk. This, however, is not always the case. Understanding debt and the implications of falling behind is important for everyone. However, if you do fall behind, it may be a good time to speak with a debt relief professional.

Source: Fox Business, "Surprise! Many Credit Card Agreements Allow Repossession," Fred O. Williams, Mar. 5, 2014

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

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