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Credit Card Debt Can Be Made Worse Through Negligence
By: Talbert Williams
The fine print in a credit card bill can be a daunting read. The terms are
lengthy, they’re written in “legalese” and your eyes typically glaze over before
you finish reading. Despite the complicated nature of these terms, they are
important, and consumers should understand exactly what sorts of things to which
they have agreed. A little known provision of most credit card terms is one that
allows the credit card companies to raise your interest rates for any reason at
all. You might think that most companies would only raise interest rates for
cause, responding to late payments or insufficient payment, but you would be
wrong.
The average credit card debt in the typical American household is nearly
$10,000. With minimum payments recently raised to about 4% of the balance and
interest rates that are more than generous, the credit card industry is a
profitable one. The industry will soon be even more profitable after the new
bankruptcy law takes effect this fall. Nevertheless, they are always seeking
ways to find more profits, and the clause in your terms that allows them to
raise your interest rates for any reason at all is a surefire way for them to
increase their profits.
The companies check the credit reports of their customers from time to time, and
then use anything negative that appears on the report to justify an increase in
the interest rate. That increase may not be clearly announced; it may just
appear on your bill as a different number than the one that appeared there last
month. The wise consumer will read his or her bill carefully each month;
otherwise an increase may go unnoticed.
“Anything negative” on a credit report doesn’t necessarily mean late payments,
bankruptcy filings or other judgments against a consumer. It could be something
as simple as a balance on an account that the credit card company thinks is too
high, or too many open accounts. In fact, the reasons used for raising interest
rates often seem rather arbitrary.
The companies justify such actions by saying that their loans are not backed up
by collateral and that there is inherent risk in their business which must be
minimized whenever possible. That ‘risk” is increased when a customer takes on
too much debt, and raising that customer’s interest rate is a way to minimize
that risk.
That may be so, but doing so to a customer who has an outstanding balance
unfairly penalizes them and forces them to pay more for purchases that they have
already made. What can you do if this happens to you? The best course of action
is to call your card issuer and complain. More often than not, the company will
reduce the interest rate to the prior level, particularly if there was no
egregious offense, such as a late payment, to justify the increase.
Should your issuer not agree to lower your rates, you may wish to shop around
for another card. The market for credit lending is an aggressive one, and you
can probably find a better deal. No matter what you do, make sure that you read
the terms of your credit card bill carefully, and check your credit report
often. It’s better to be safe than sorry.
About the Author:
Talbert Williams offers debt consolidation, debt reduction, credit card debt
referrals and advice. For more information, articles, news, tools and valuable
resources on debt solutions, visit this site: http://www.1debtfreedom.com
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