The Credit Card Trap What You Need To Know

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The Credit Card Trap What You Need To Know by Sandra Simmons

An inviting trap created by our modern-day financial system, credit cards can be harmful to you financial health.

Buying something using a credit card is not bad, IF you have the income to pay the credit card balance in full when the statement arrives.

But, purchasing things with a credit card when you don’t actually have the money, means you are committing your future income to the credit company with the threat of a black mark on your credit rating. That is financial slavery.

During the past several years, debt consolidation experts have helped many people to escape from the credit card trap with debt reduction programs. That says a lot about how bad the situation is. Assisting people to do this is not looked on favorably by the credit lenders; after all, they lose all that profitable interest. They create more enticing offers to hook consumers back into the trap with offers like 0% interest for extended periods of time.

Are you really getting 0% interest? Only if you can pay off the debt in advance of the expiration date of the offer. What the credit company are hoping is that you will NOT have the ability to pay it off.

If you can’t pay, what happens then? Be sure to read the fine print carefully on their ‘Terms and Conditions’ agreement. Many agreements have an attractive interest rate in big print; typically it is 9.99% to 12.99%. But, watch out for variable rates, because that means it is the ‘lower’ rate PLUS the ‘prime rate.’ The banks charge the prime rate to the credit company to lend them the money, and that gets passed on to you. This alone can add a staggering 6 - 9% on top of that attractive interest rate.

Read further and the rest of the trap is revealed. If you pay late or miss a payment, the credit company have the right to increase the interest rate to well over 30%. PLUS, they are allowed to add an additional $25 - 39 in fees. On a $1,000 balance, that is $52 - 66 in monthly interest and fees you are required to pay before you ever get to pay the first dollar of the price of the item you bought with the card.

What other tricks do the credit companies have in their arsenal of weapons to make sure they keep making money from you?

That enticing ‘minimum payment’ they allow you to make which is mostly interest, and keeps you paying for whatever you bought for about 20 years. In addition, they are now using invitations to get money back from retailers or earn airline miles for each dollar you charge to the card.

Who do you think is paying for those credits? Right! You do! The credit companies charge the stores for the cash they give you back, and then raise the price you pay.

Credit card companies pay a tiny amount up front for each airline mile that they ‘give’ you for every $1 you spend. In an NBC TV news interview in January 2007, the president of a major airline said that it costs the airline industry $10 to fly you somewhere after you have earned 25,000 air miles to take a flight.

Who actually benefits financially if you charge up your credit cards to earn a ‘free’ flight? It does not take a genius to see that trap dressed up to look like a big benefit to you.

Sandra Simmons, President of Money Management Solutions, has years of experience helping business owners and private individuals manage their income to achieve financial freedom. To learn more about the Money Management Software she created, watch the FREE 5-minute demo video on her website at www.MoneyMgmtSolutions.com

TransUnion: 3Q credit card delinquency rate rises - Boston Globe

3 Dec 2008 at 1:34am
NEW YORK? The percentage of people who were delinquent on their credit card payments rose in the third quarter from the same time last year, while average debt per borrower jumped 7.7 percent, according to credit reporting agency TransUnion LLC ...

EU businesses say governments should buy commercial paper to ease ... - Newsday

3 Dec 2008 at 10:53am
BRUSSELS, Belgium (AP) _ European Union businesses called on EU governments Wednesday to buy up company debt to ease financing and help prevent bankruptcies as the economy shrinks. BusinessEurope, which represents most EU companies, said commercial ...

US, European interbank lending rates drop again - WTOP Radio

3 Dec 2008 at 6:06am
LONDON (AP) - Interest rates on three-month dollar loans between banks fell for the second day running Wednesday while the equivalent European rates also fell ahead of Thursday's expected rate cuts from the European Central Bank and the Bank of ...

South Dakotans rank low in credit card debt, agency says - Argus Leader

3 Dec 2008 at 11:14am
NEW YORK ? A credit reporting agency says the average credit card debt in South Dakota is third lowest in the nation. Figures from TransUnion LLC show the highest state average card debt was $2,486 in Alaska. Residents of Iowa had the lowest ...

SD Has Third Lowest Credit Card Debt - KSFY.com

3 Dec 2008 at 10:03am
Story Updated: Dec 3, 2008 at 11:10 AM CST A credit reporting agency says the average credit card debt in South Dakota is third lowest in the nation. Figures from TransUnion LLC show the highest state average card debt was $2,486 in Alaska. Residents ...

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January 25 2008 06:33 am | Credit Card

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