Congress is now in tune to the problem and has held various oversight hearings. However, we feel it is unlikely that any major reforms in the industry are likely during the election year, but attention to the issue will only heat up. Half of Americans carrying total credit card debt average around $10,000 each (according to the U.S. PIRG). Because of the enormous amount of debt people are facing in other areas of their life with student loans, ARM mortgages etc., it's hard for anyone to afford jacked interest rates on their credit cards.
Common Practices Credit Cards are Using to Get More From You
Double-cycle billing: This is a practice, which is confusing when explained in plain English, let alone when sifting through the fine print. Here, banks issuing credit cards will charge you interest on the entire amount you charged during a billing cycle, regardless of the amount you actually pay off. For example, if you charge $2,000 one month and pay off $1,900 leaving a balance of $100, the bank will make you pay interest on the full $2,000 in the next month and beyond, until the remaining $100 is paid off.
Universal Default Pricing: This is a practice where banks are taking advantage of good responsible customers. Regardless if you have never missed or had a late payment on your current credit card, companies may now raise the current interest rate on your card if you are late on a completely different bill with a completely different company. In addition, they can raise your current rate if your credit score falls.
Zero-Tolerance Late Payment Policies: Little leeway now is given to customers
Suggestions
Milk Your Money is troubled by these practices, which are becoming more common, and has a few recommendations you should take as a cardholder to ensure you are not a victim of these rate hikes.
1) Read your statement each month. Look to make sure that the interest rate remained the same from the previous month. Look to see if any fees or penalties were charged to your account. If any of these appear on your statement, call you company and get explanations, you many see these charges dropped, just for asking.
3) Forget about rewards programs if you are paying interest month to month. Rewards from credit cards should only be taken into consideration for those that are truly responsible with their spending. Rewards average around 1% of your total purchases. This is a number, which is wiped out with one late fee assessed to your account or a month-to-month interest payment. Companies love that people are obsessed with earning frequent flyer miles or any other reward when using a card, many of these people don’t look at their credit card statement, but do look at how many miles they have earned. Money is money, so treat it that way.
4) Call your card issuer and ask for a lower rate. We have stressed this before in an earlier post. Nearly half of the people who call into their company asking for a reduced rate are successful. This is an amazing number! Credit card companies spend so much money marketing their cards and gaining new customers, that once they have you, they don't want to lose you. Take advantage of this and ask for a lower rate today! $
2 comments:
I learned to get rid of and stop using all my credit cards 2-years ago. As a result, I finally paid off my credit card recently. Thank God, they are out of my life. Now my focus is on that home improvement loan.
I think it is always important to find a card with low interest rates, but to be honest with you if you pay the whole thing off every month that interest really never affects you. You should always start out with some kind of store credit card. i.e. Walmart or Target. Just be careful cause they can hurt you like a regular card.
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