Five Dirty Secrets of Credit Card Companies
10 Aug
Credit card debt is increasing rapidly, yet consumer ability in reducing their debts is at an all-time low. If you want to avoid bankruptcy, you should find ways to reduce or eliminate debt, especially those high-interest credit card debts. However, your attempts can be made complicated by a few unexpected things. These are five dirty secrets of credit card companies that can make your life miserable.
1. Small prints. Often, credit card companies tempt people with low interest rates. What you may not realize is that the low rates are likely just introductory. While you may think that it is possible to reduce debt by transferring your balance to a credit card with lower rates, what you’ll do might result in the opposite, depend on how much the actual interest rate is after the interest-free period. If your card have more than one interest rate, it is likely that payments made are applied to the lower interest and it is compounded on the highest interest rate.
2. Rolling balances: If your balances aren’t paid in full at the end of the month, the amount will be carried over, and next purchases the same month get interest accrued usually at the date of purchase. You won’t get a one month grace period on your new transactions. It is a good idea to pay off the balance completely at the end of the month.
3. Terms: Your terms, for example interest rates, may change for any reason at any time, influencing current balances in the process. If for any reason you miss a payment, they may change the terms of your agreement. This can be harmful to those who are trying to eliminate debt.
4. Legal rights: Credit card issuers are legally allowed to review your credit report. Sometimes they can see if you are trying to eliminate debt with other creditors. Because they have access to your credit report, they might try to use relevant information against you.
5. Universal default: Your card company can raise your interest rates immediately, after checking your credit report and discover things that can increase their risks. They are basically stating, “We have a universal right to raise our interest rates if a customer has a higher chance of not repaying us. A credit card company may charge up to 30 percent. If you fail to keep current, it is possible for them to use this fact against you.
