Many people who own credit cards end up in serious and almost unmanageable debt simply because they didn’t handle their cards well, and they didn’t read the credit card fine print. The fine print contains all the things the credit card companies would rather you weren’t aware of, because these things might make you angry. Most people don’t become aware of some of the things hidden in the fine print until they are affected by one or more of them and see their debt burden increase.
One of the most potentially devastating things hidden in the fine print of your credit card agreement is what’s called universal default. Thanks to this loophole on the part of the credit card company, you can see your interest more than double in a day even if you do absolutely nothing wrong. You can make your payments on time, even pay more than your minimum monthly payment, and watch your interest rate jump to almost 30% simply because you took out another loan or opened another credit card.
Credit card companies monitor your borrowing habits on things other than the card you own from them. If they check your credit report and see that you’ve been borrowing money recently and are getting close to your borrowing limit, they can cry universal default and raise your rates. Two card companies have stopped this process since the public has become more aware of it, but other companies still practice it. Lawmakers are attempting to push through credit card reform to stop such practices. Until then, you could see your rates rise at any time based on how close you are to your limit in your other debt.
Other fine print that many people aren’t aware of is the clause that allows for cards to raise your raises after one late payment. You might get a card that has an extremely lower or even 0% interest rate for a 3 or 6 months, or even longer. If you make one late payment during that time, the interest rate will jump to the standard APR, or even higher. It takes just one late payment to make this huge change, and also tack on a late payment fee. A second late payment will likely see your interest rate jump even higher.
Something else to be aware of that might not be immediately obvious on the credit card agreement are the multiple APRs most credit cards use. Often the low or 0% APR that credit cards use to get you to sign only applies to new purchases. Any balance transfers (the amount you transfer to the new card from other credit cards) will often have its own much higher APR. And cash advances from an ATM usually carry a third and different, and much higher, APR. Many people have been tricked into thinking they would owe no interest on balance transfer for 6 months by taking out a new card, when in reality the transfer carries almost as interest as it did on their previous cards.
Comments
No comments.