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Bad Credit Personal Loan and Bad Credit Loans
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Factors That Trigger Credit Card Rate Hikes
Are credit card companies trying to scam you? On the one hand,
they provide a valuable service that gives you the added
convenience of being able to purchase items and services you
need and sometimes don't need and to pay them off in a manner
that best suits you.
On the other hand, some credit card issuers are trying to scam
you and they do everything in their power - legal or otherwise
to do it. Legal or not, many of the practices they follow are
clearly unethical and unless you are a contract lawyer you
couldn't determine how they planned on scamming you anyway
because they hide everything in the countless pages of fine
print that comes with every cardholder agreement.
According to Harvard Law Professor Elizabeth Warren, the credit
card companies are misleading consumers and making up their own
rules. "These guys have figured out the best way to compete is
to put a smiley face in your commercials, a low introductory
rate, and hire a team of MBAs to lay traps in the fine print."
The problem is that the industry is operating without fear of
penalty. There's no regulator or customer who can bring this
industry to task.
Deadbeat or Revolver In the credit card industry there are two
types of customers - the deadbeat and the revolver. Don't take
this the wrong way but hopefully you're a deadbeat because in
the lingo of the industry a deadbeat is someone who uses their
credit cards the way they are suppose to.
As in they pay-off their balances each month and therefore incur
no interest charges. No profit in that scenario and thus, if you
pay-off your balances each month (about one-third of Americans
do) then you should be proud to be called a deadbeat because you
are using your credit cards wisely.
On the other hand, the majority of Americans are called
"revolvers". A revolver is someone who carries over a balance
and is considered to be "the sweet spot" of the banking
industry. This "sweet spot" continues to expand as the average
credit card debt among American households has grown to about
$8,000 -- which is more than double what it was just ten years
ago. This debt has helped generate record profits for the credit
card industry in 2004, an estimated $30 billion before taxes.
The 0% Interest Offer The game today is the "0% interest for 6
months" offer. Once again, this can be a legitimate and great
deal if you know how to play the game ("deadbeat") but if you
don't ("revolver") it will end up costing you more money in the
long run because after the initial 6 months the rate will
usually jump up to a much higher rate than the normal purchase
rate.
Rate Hike Triggers The industry provides many reasons to justify
rate hikes and in all fairness, some are actually valid.
However, many are not and are just flat-out deceptive. One
Banking Association spokesman said that, "Because the credit
card business is unsecured lending, the risks associated with
the business must be offset."
Industry critics say that an ever growing share of the
industry's revenues come from deceptive tactics. One example is
how the "default" terms are spelled out in
the fine print of the
cardholder agreements. The terms and conditions can be changed
at any time, for any reason with only a 15 day notice.
Here are just some of things that can trigger late fees,
penalties or rate hikes.
Late Payments If you don't pay your bill on time, the company
seems quite justified in taking away your good rate. After all,
you've broken the rules of your contract. The problem lies in
the fact that penalty fees and rates are sometimes triggered by
a single lapse or a payment that arrives just a few days, even a
few hours late or a charge that exceeds the credit line by a few
dollars or a loan from another creditor which renders the
cardholder "overextended" as defined by the three all-powerful
credit bureaus - Experian, Equifax and TransUnion.
In addition, the industry is raising interest rates, adding new
fees and generating payment due dates on holidays and Sundays
with their only motive being of tripping you up and hoping it
will result in you making a payment late. The industry has
become a very anti-consumer marketplace.
Spending on Other Cards If you think that one card issuer
doesn't know with whom and how much you spend on other cards
then think again. As a result, if you exceed your credit limit
or make a late payment on another card it can trigger what's
called a "universal default clause" and result in higher rates
on other cards - cards that you may have had for years and never
had a late payment.
Defaulting on Non Credit Card Bills Defaulting on any bill
(utilities, cell phone, mortgage, etc) can trigger higher
interest rates on your credit cards. Every bill you have is
tracked by the 3 primary credit bureaus and with the emergence
of technology your information is readily available to any card
issuer. So if you default or pay late on anything, they'll spot
it and it could result in higher rates on some or all of your
credit cards.
Some experts say the profitability of credit cards began
twenty-five years ago when the banking industry successfully
eliminated a critical restriction: the limit on the interest
rate a lender can charge a borrower. Deregulation, coupled with
a revolution in technology that enables the almost real-time
tracking of personal financial information and the emergence of
nationwide banking, has facilitated the widening availability of
credit cards across the economic spectrum. But for some, the
cost of credit is often far greater than it appears.
If your rate is suddenly increased, the first thing you should
do is cancel the card and move the balance somewhere else. If
you can't do that for whatever reason, then contact your local
consumer protection agency and if all else fails you may need to
contact a lawyer.
This article may be reproduced only in its entirety.
About the author:
Kevin Erickson is an entrepreneur and writer. To read other
articles he's written visit: Consolidate Debt |
Eliminate Credit Card
Debt | Managing
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