Have you ever had a credit card company just raise a rate
on you and never tell you why? Do you feel that credit card
companies are trying to scam you? Credit cards are a
necessary evil in todays world because of the added
convenience they provide. There is a reason that credit
card companies send you paper on top of paper with fine
print even those with perfect vision can not read. Even if
you feel they are not trying to scam you, you must at least
admit they follow practices that are unethical at best.
This article will delve into the credit card industry and
some things you may have too watch out for.
According to many experts on the card industry, the credit
card issuers are misleading consumers and making up their
own rules as they go. They advertise with cute commercials,
offer a very low introductory rate, and hire the finest
minds to figure out a way to trap you in the fine print.
The real problem lies in the fact that the industry is
basically unregulated with no over site committees around.
Lets go a little deeper and expose some things.
The industry basically has a couple kind of customers. The
first is the customer who pays off all of the balances
before they are due. There is no profit to the credit card
issuers so these people are called deadbeats. These people
are using cards the way they should, don't buy with money
you don't have and pay before you have any finance charges.
Approximately 33% of all credit card users fall into this
category.
A majority of users carry a balance and are the
"profit-makers" for the banks. The average user runs a
balance of just over 8,000 in credit card debt. These users
pay interest and fees for the privilege of carrying that
balance. Over the last ten years this balance has doubled
and credit card companies are generating record profits.
Last year alone the credit card industry earned an
estimated 30 billion dollars.
The name of the game today is the 0% interest offer for the
first six months. This can be legitimate if you know how to
use it and of course pay your debts off. The trouble comes
in when you carry over a balance because many times this
will cost you more in the long run. The rate after six
months will jump higher than a normal rate and you will end
up paying more for carrying the charges.
The second way the companies gain massive profit is with
rate hike triggers. The industry provides many reasons to
justify a rate hike and some are legitimate ones. The ones
I am worried about are the deceptive reasons. One of these
ways is how the "default" terms are spelled out in the fine
print. The terms and conditions of this credit card can be
changed at any time, for any reason with a 15 day notice.
The following are ways that can trigger late fees,
penalties, or rate hikes.
Late payments If you don't pay your bills on time, the
company is justified in taking away your rate. You broke
the rules. The problem is the card issuers are becoming
very anti-consumer to help you trip up. One single late pay
or lapse, a payment lost, or a charge on another card can
trigger the rate increase and excessive late fees. I have
even seen card issuers lower the available balance of the
card holder to the exact amount of debt owed and then
charging them an over the limit fee.
Spending on other cards If you don't think the credit card
companies don't know what you are doing with the other
cards think again. As a result if you go over your credit
limit or a late payment on another card it triggers a
"universal default clause". It gives the card issuer the
right to raise your interest rate on a card that you have
never made a late payment too.
Defaulting on non credit card bills Everything is tracked
by the big three credit bureaus and a late pay on a
mortgage, cellular bill, utility, or car payment is readily
available for the credit card issuer. If you default on
anything they will spot and then increase your rate.
When I look back it seems that credit card issuers started
to profit massively when the banking industry successfully
eliminated the limit on interest rate a lender can charge a
borrower. This deregulation and the technology upgrades
that allow for real time tracking of finances, lead to
record profit year after year. Now with nationwide banking
the industry keeps growing and makes even more credit cards
available. The real cost of this credit is actually a lot
more than most people would realize but that is for another
day. If yo get your rate increased I would close out that
card and try to find one with a lower rate. If thats not
possible your only other recourse is to overpay and get rid
of those excess charges. Good Luck
----------------------------------------------------
David Forer is a financial veteran of 15 years. To tap into
his knowledge about credit repair, debt management, and
budgeting go to his blog at
http://www.creditrepairdoneeasy.com and receive a free ten
page report.
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