Thoughts on Debt

Ban raising rates on existing balances unless you’re at least 30 days late paying the minimum due

“They’re not gonna raise the interest rate if you’ve been less than 30 days late. In the past, if you were three days late (for instance), they would hit you. That’s not gonna happen anymore. So that’s a really, really good thing.” Payments won’t show up on credit reports as late anymore until the 30-day mark is hit.

Eliminate the “universal default policy”
“They’re not gonna increase interest rates if your payment is missed on another card. … If you miss on your phone bill or something like that, the credit card companies see it and raise all your interest rates to across the board. That’s what’s called the ‘universal default clause.’ That one’s gonna be gone, too.”
End “double-cycle billing”
“No (more) retroactive interest. This is what’s called ‘double-cycle billing.’ You’ve paid your bill for the last month, but you’re still paying interest, even though you’ve paid it off in the past. It’s outrageous. So, they’re gonna stop double-cycle billing. That’s a really very, very good thing.”
If you pay more than the minimum due, prohibit banks from applying the extra only to the parts of your balance carrying the lowest interest rate

Improve the readability of monthly statements

“Those things have got all sorts of legalese and (are) very difficult (to read). (Banks are) supposedly gonna make it much easier to read, so you understand the interest rates, you understand the late fees and all that, so that, hopefully, should make things a little bit better.”
There will be more bold-face print, and still be a bunch of legalese, but more plain language. Companies will have to be more forthcoming on their policies.

Most experts feel, although these changes will begin moving the credit card companies in the right direction, that they will still find legal ways to get us to pay more like increasing membership fees and so forth.  For now keep an eye on the changes and on your statements, because you don’t know for sure when the changes will begin or how other areas of your billing may be affected.

Credit cards can be a very helpful tool, but they can also be one of the biggest financial pitfalls if you are not careful.  There are some things that you need to know when applying and using credit cards.  The following are some tips to using your credit cards wisely.

1.  Make sure you are aware of changes in rates and rules.

2.  Pay your balance monthly, even if it means taking out a personal loan.

3. Apply for a card with a credit union instead of a bank, they have less fees and lower interest usually.

4. Don’t use credit cards when traveling abroad.  Conversion fees are steep, instead use an ATM machine to access your bank account or use traveler’s checks.

These are just some wise tips in using your credit cards, however, there is a whole other realm of credit card use that you must be aware of.  This is when the credit card companies change rules mid stream or offer low rates to draw in your business and then raise them without you being aware.  Some recent reports show that consumers have been fooled by some of these “tricks” and so these are the things that you need to be aware of.

YOUR RATES ARE RAISED WITHOUT YOUR WARNING

You are going along and paying your bill on time but you have a late payment on another card, or your credit score drops for some reason and the credit card company raises your rate on all of your cards.  Even if you come close to your credit limit, this can cause your rate to increase even if you haven’t exceeded it.  If this happens your credit card company is required to let you know so be sure to read all the correspondence from them carefully and keep a close eye on that bill.  No one needs surprises like this, and it is perfectly legal.

YOUR DUE DATE CHANGES

On late payment can allow them to raise your interest rate higher then you probably even think is possible.  Due to this, some banks unknowingly will change the due date on your bill, so that your payment is due sooner than you originally thought, causing your payment to arrive late and giving them license to raise your interest rate.  Again, look at that bill very carefully as this is another completely legal practice.

EXTRA CHARGES AND PENALTIES

Know how much extra your credit card company will charge you for cash advances and balance transfers before doing them.  Large fees can be associated with these types of transactions and once you do them, you will be stuck with the bill.

MISLEADING INTRODUCTORY RATES

You will receive credit card offers for low interest credit cards, and you think this is great and you transfer your balances or run up the card and then you find out that the interest rate shoots up to about 30% after the first month.  Be sure to read the fine print and keep in mind that if an offer seems too good to be true, it probably is.

MANDATORY ARBITRATION

Keep in mind that about 75% of credit cards have clauses that say disputes must be resolved in private forums, so when issues arrive you can’t take them to court.  Even if those issues are ones of identity theft or things that are out of your control.  Studies have shown that if you take a company into arbitration you will lose since in arbitration the credit card companies win on the average of 96% to 99% of their cases against consumers.

In short, be sure to think twice before buying on credit, and be even more rigorous about reading your credit card statements and applications.  These are the keys to keeping your money in your hands.

Most American’s are carrying a lot more debt than they can afford.  Credit card debt in the US has reached a record high - Nearly $1 trillion, according to the latest figures from the Federal Reserve Board.  The average American household’s debt from credit cards has risen from $2966 in 1990 to $9840 in 2007.

As getting loans becomes more difficult and the cost of groceries and medical bills is on the rise, more and more people are turning toward plastic instead of cash to meet many of their basic needs.  For many of us easy credit has lead to spending well beyond our means.

The debt crisis in this country however, is created less by our spending and more as a result of an industry devoid of regulations and checks and balances.  For too many years, the credit card industry has been allowed to run rampant with charges and additional fees well beyond what is reasonable.

Consumer complaints and pleas for help may be having an effect.  Both the Federal Reserve and Congress have proposed new rules that have broad support.  Unfortunately, action has not yet been taken, but it is on the horizon.

The real problem is that the credit card companies make the most money on those of us who can’t afford what we spend.  This is why if you pay your bill in full every month, the credit card companies have a term for you and surprisingly they think of you as a “deadbeat”.  They deliberately target those who can not afford to pay their bills.  As a matter of fact, if you are having trouble paying your credit card bills, then you will more than likely receive some extra credit card offers in the mail.  They all want you to borrow from them.

We can hope that the legislation will soon be coming down the pike to give these big companies what they truly deserve and perhaps bring some relief to us all.

I recently saw an infomercial on TV about debt.  I thought it had some very interesting information about how credit card companies prey on the weak.  This interview was with someone who had written a book about resolving your debt, I am not sure that I really want to plug this book, hence I am deliberately omitting the name of it from my article.

The author had some interesting thoughts that I want to share with you.  He said that credit card companies specifically target people who are low income, students, uneducated, and minorities for the sole purpose of getting them in over their heads.  Counting on the fact that it is the people without money who will max out their credit cards the quickest.  Now you may ask yourself how this serves them.  Well, let’s say for instance that you charge $1000.00 on a card that’s limit is $1000.00.  You start out making the minimum payments, but the account keeps growing and with interest your account goes over the limit and that costs you an additional $45.00 per month, and then you send in a late payment and that costs you another $45.00 and before you know it your balance when it goes to collection is about $5000.00.  Figuring that you made $600.00 worth of payments while paying the minimum and you only borrowed $1000.00 in reality then you would owe about $400.00 to the credit card company, but now they are saying you owe $5000.00 now many people actually do at least begin paying towards that $5000.00 and many actually pay it off.  If you don’t however, the company is really only out about $400.00 and they get a tax break on that money from the government and then turn around and sell the $5000.00 debt to a collection agency.  This process can be seen by many as legalized loan sharking, in the fact that with interest and charges your balance can go from $400 to $5000 in almost the blink of an eye.

People who pay their credit cards every month, provide very little income to the credit card companies and therefore they want nothing more than to see you overspend and fall flat on your face.  The problem that most people with debt face, is even after they realize their mistakes, stop spending and try to pay down their bills, they are too late because the charges are rolling in and the debt keeps increasing, even though they are not spending at all.

This book claimed to have answers and debt solutions, however, after looking into it, this particular author has tried several different avenues of scamming the public through the years, and therefore, I would not recommend his book to anyone, however, I did think that the information about the credit card companies and how they make money on you even when you don’t pay was extremely informative and worth sharing.