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BEAT CREDIT CARD DEBT
- MINIMUM NOTICE CHANGES - If the above is not bad enough,
consider the consumer with on time payments every month on
everything. No problem, right? WRONG! Buried within the contract
(that contract law attorneys admit they have great difficulty
interpreting), is a clause that allows the company to change
your interest rate "at any time, for any reason, as long
as the holder is given 15 days' notice." That's right.
They change their mind AFTER you make a purchase at 6.5% for
example, and former agreements are null and void. How can
a purchase price be changed after the sale? No other industry
can do this but the credit card company can.
- USURY OR NOT - According to Frontline, "There is no
federal limit on the interest rate a credit card company can
charge." In fact an interest rate of 35% is not unheard
of. This is because in the 1980s South Dakota and Delaware
eliminated the cap on usury laws which is what constitutes
the maximum allowable interest to be charged. Have you ever
noticed the return address on your credit card statement?
Chances are it is Delaware or South Dakota. Gee, I wonder
why.
- DEADBEATS and REVOLVERS - Deadbeat use to mean someone not
taking responsible action. This is not true in the upside
down credit industry. In credit card bill jargon, "Deadbeats"
pay their balances off in full every month. They are deadbeats
because the industry receives very little profit off of these
responsible consumers. On the other hand, "Revolvers"
roll credit card balances over month to month and never pay
in full. This is the ideal customer because of the profit
generated. Then there are "Rate Surfers" or "Gamers"
who shift usage between credit cards based upon interest rates.
- FEES - Again quoting Frontline, "In 1996, the U.S.
Supreme Court in Smiley vs. Citibank lifted the existing restrictions
on late penalty fees. This means simply, there is no limit
on the amount a credit card company can charge a cardholder
for being even an hour late with a payment." But this
has opened a Pandora's box for not only late fees, but over
the limit fees and bad check fees as well. A lawyer who worked
on the Smiley case says he believes penalty fees which use
to be $5 or $10 could rise to $50 in another year. Now the
consumer not only must contend with a higher rate, but late
fees as well. Additionally what if these fees put them over
the limit creating still another fee. It is a never ending
spiral towards bankruptcy.
- MINIMUM PAYMENT - Consumers use to be required to pay 5%
of the outstanding balance. But slick credit card marketers
suggested implementing a 2% required minimum payment. This
was advertised as consumer friendly with "easy low payments."
The truth is, the tactic allowed consumers to increase their
debt because of the lower payment which in turn created more
profit through higher debt over a longer time period. Check
out my article Balance Transfers and find out how much interest
you pay on a minimum payment on $5000 during the 20-41 years
you are making minimum monthly payments. (The average household
US credit card balance is $7500 to $8,000.)
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