Charge card Debt – Read Your Statement Carefully
Posted on August 4, 2010
Filed Under Credit | Leave a Comment
The small print in a charge card bill can be a daunting read. The terms are extensive, they’re written in “legalese” and your eyes usually glaze over before you finish reading. Despite the complex nature of these terms, they are very 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 corporations to raise your rates of interest for any reason at all. You might think that most companies could only raise interest rates for cause, responding to late payments or inadequate payment, but you would be wrong.
The average bank card debt in the typical American household is nearly $10,000. With minimum payments recently raised to about 4% of the balance and rates of interest that are more than generous, the credit card business is a lucrative one. The industry will is now far more profitable since new bankruptcy law took effect several years ago. Nevertheless, they are usually looking for ways to find more earnings, 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 boost their earnings. The companies check the credit history of their customers every now and again, and then use anything negative that appears on the report to justify a boost in the rate of interest. That boost may not be plainly announced; it may just show up on your bill as a different number than the one that appeared there last month. The smart consumer will read his or her bill carefully every month; otherwise a hike in the interest rate may go unnoticed.
“Anything negative” on a credit rating does not necessarily mean late credit card payments, bankruptcy filings or other judgments against a consumer. It could be something as easy as an outstanding sum on an account that the credit card company thinks is too high, or too many open accounts. In fact, the reasons used for raising rates of interest often seem rather arbitrary. The corporations justify such actions by saying that their loans are not backed up by collateral and that there is built in 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 rate of interest 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 blatant offense, such as a late payment, to justify the increase in the interest rate. Should your issuer not agree to lower your rates, you may wish to search for another card. The market for credit card customers 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 charge card bill carefully, and check your credit profile often. It’s more favorable to be safe than sorry.
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