The image of credit cards in society is that they are convenient. The price for convenience when it comes to credit cards may be too high for what you get. Many Americans are now finding themselves in tough financial difficulty due to overuse of credit cards and credit.
Few people fail to understand the mechanics of how credit cards actually work. If you only make minimum payments on your credit cards, it will take you over 30 years to pay off the debt. Hopefully this will make you think twice before using your credit card at McDonalds. A lunch that takes 30 years to pay off probably is not worth it.
Credit Card Companies Likes Revolvers Hates Deadbeats
It seems that credit card companies are targeting people already in debt. Credit card companies refer to people that do not pay their balances in full each month as revolvers. If you are paying your balance each month you are considered to be a deadbeat because they do not make as much money off of you as someone who carries a balance monthly. As you can guess a business would focus on their customers that are making them money vs. the ones that are not.
Credit Card Fees On The Rise
Last year, in 2007, credit card companies made over $18 billion dollars in various fees. These credit card penalty fees make up nearly 50% of all revenue generated by credit card companies. This is nearly double from 2003. You won’t get a lot of sympathy from your credit card company if you are late. This is how they make money off of you.
Credit Card Introductory Rates Can Be Misleading
You have probably seen your mailbox crammed with 0% Interest Rate Introductory Offers. You need to be very careful with these. Read the contract offer very carefully. The intro rate may only apply to the balance that is transferred. Any new purchases could carry a higher interest rate. Also, look very carefully at the fees and interest charges for cash advances. Credit cards love cash advances as this is one of their biggest cash cows.
Pay Your Credit Card Over The Phone? Pay A Fee?
Some credit card companies charge for the privilege of paying your bill over the phone. That is sure nice of them. They prey on people who want to pay their bill last minute to avoid being late. Either way they are going to try and hit you with a fee. Either you are late, over the limit or hit with an over the phone payment fee. They know people are going to do it, so why not charge for it. Be sure to pay your credit card bills promptly so you do not get stuck in this trap.
Does Your Credit Card Carry A Mandatory Arbitration clause?
The majority of credit cards have a mandatory arbitration clause in them. This means that you cannot take your credit card company to court if you have a problem. You guessed it, less than 3% of consumers ever win their arbitration cases. That is great for the credit card companies and bad for you. It is amazing how that works out for the credit card companies.
Rates Can Go Up Without Notice - Beware of the Universal Default Clause
Do not assume that your credit card interest rates are set in stone. Check your statement each month. They can go up and you may not even notice. Credit card companies do not have to notify you in advance to a rate hike. One item you should check in your credit card agreement is the Universal Default Clause. This clause allows a credit card company to hike your rates if you have a slow payment on another credit account but not on this one.
The other thing that can change is your due date. Some credit card companies will switch you to a 20 day billing cycle instead of a 31. As you can guess this really messes up a consumer’s repayment schedule. Most people have been programmed to be on a 30 day billing cycle for everything.
I am not saying do not use credit cards. They are convenient and often necessary. Some things you just can’t do if you don’t have a card like rent a car. Just about all car rental companies require a major credit card. No card – no car.
You just need to use your credit cards responsibly. They are a force in our society that is not going to go away anytime soon. You just need to be smart about how you are using them.
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