Would you pay an old debt to get a new credit card?
There’s a good reason why many old credit card accounts are sold off to debt collectors for pennies on the dollar… the chances of successfully collecting on them are quite slim.
However in recent years, a handful of debt collectors have gotten creative with how they get people to pay: offer them a new credit card in exchange for paying the debt. That’s exactly what Genesis Financial Solutions does with their Milestone credit card offer. Sometimes, the debt is reportedly past the statute of limitations. However, there’s really nothing to stop debt collectors from hounding debtors and it’s a very lucrative business.
Who’s behind it?
The Milestone MasterCard is issued by Missouri-based Mid America Bank & Trust Co., which has been around for almost a century (so they’re certainly not a fly-by-night operation).
If you’re looking for the Milestone credit card application you’re not going to find it – this is a targeted offer that is mailed out to people with charged-off debts. Often times, the amounts owed are relatively small (in the hundreds).
Is it a legit offer?
The offer is legitimate but how it’s marketed draws some criticism. Why? Because some people don’t understand they’re signing up for debt repayment.
For example, one member of CreditCardForum received an offer in the mail that if she paid $300, she would be given this credit card. At the time she accepted it, she had no idea that payment was going towards a debt which was past the statute of limitations.
Regardless, she was very happy with the outcome: it allowed her to pay back the debt and get a new MasterCard with a $300 limit.
Once you accept the offer, you have to pay a specified amount:
After paying the required amount, you are left with the credit card to use however you want.
In short, think of it as a balance transfer for bad debt. The prize you get for cooperating is the new card. For some who don’t have any other options due to their bad credit this can be a tempting carrot.
Worth it for 2014 or not?
I would base my decision on these three factors:
- How much is the debt? Obviously the smaller the amount, the more enticing it is.
- How bad is your credit? Even if you have horrendous credit, you can still probably qualify for secured credit cards with annual fees of less than $50. So there are other options out there.
- Does Milestone still report accounts? There have been some rumors buzzing that credit card accounts from the Milestone program are no longer reporting to the credit bureaus. I have not confirmed whether or not that allegation is true.
More than one member of CreditCardForum has accepted this offer. Ultimately if you take them up on this, you are getting something in return for what you should be doing anyway: making good on your bad debt.