The Truth About Credit Cards and What To Do About It

The Truth About Credit Cards and What To Do About It

There is a lot of misinformation being propagated by the media and many financial professionals and personal finance gurus. The real problem is that almost everyone believes them. I won't talk about the specific myths here, because I do that in my book, but I am going to talk about the reality we are facing with credit cards as consumers. Credit cards do more to harm the financial health of households in the U.S. than any other financial instrument available. Interest rates almost brought down the banking industry in the early 1980s when banks were upside down on interest, paying out higher interest rates than what they were collecting on their established fixed rate loans. That was until they took advantage of a Supreme Court decision in 1978, Marquette vs. First Omaha Service Corp., which opened the door for unlimited interest rates, even in states where interest rates were limited. This is done by virtue of the national bank basing their operations in a state with no interest rate limit. (Bankrate.com, "The Higher the Balance, The Higher The Late Fee", by Lucy Lazarony, Feb. 27, 2003) That is why Citibank is based in South Dakota. Special political deals were made with the state's Governor to allow this kind of practice to be legal. That is because in 1980 the South Dakota economy was in trouble. Citibank seized the opportunity and agreed to relocate their corporate offices to escape the usury laws they were under at the time.

Today, credit card holders are subjected to abusive agreements that are loaded with tricks and traps that catch them in snares that they cannot escape from. When trapped, they pay interest rates up to 34% and fees such as late fees which actually calculate to an effective 400% APR in many cases for defaulting accounts when you include fees. Then there is over limit fees, double cycle billing interest rate calculations, grace periods that disappear, mysterious phone charges, and lately a re-emerging annual fee. The agreements are difficult even for an attorney to decipher. Card holders think they are gaming the system by paying off their balances every month and accumulating frequent flier miles and other kinds of rewards. But the reality is that very few of those miles actually get cashed in before they expire, due to the ever increasing limitations on their use. In the meantime, consumers spend 12% to 18% more when using credit cards instead of cash, according to the American Bankers Association. Banking industry associations admit that defaulting cardholders are the sweet spot of the industry, where 75% of the profits are generated. In 2005, interest and penalties accounted for almost $80 billion in revenues. (Bank Card Profitability, 2005-2004, CardWeb 2006)

Credit card companies have been targeting customers who are likely to default and they craft their agreements carefully to make them confusing and contradictory. They use open ended contract terms where they can change the agreement with an easy to miss notice in the mail. This also allows them to default customers on the slightest infractions. At that point they can enforce the default terms of the agreement without notice to the cardholder. This has come to be known as "universal default". The industry denies the practice, but evidence of consumer complaints shows it is widely practiced and implemented.

The industry claims "risk based pricing" is used to charge interest according to the customer's likelihood to default. However, the universal default practice has made it possible for them to default a customer for simply getting a small drop in their FICO score rating, a score that is fraught with errors from inaccurate reporting to creditors by the very companies that profit from the drop in scores. Isn't that a conflict of interest, and shouldn't it be illegal? The marketing message is the "Life Takes VISA", insinuating that it is a requirement to carry one in today's world. A marketing message that has been largely successful since most everyone believes it. Yet, it is more accurate to say that VISA takes life, because it is putting more Americans in debt with clever contracts and marketing tricks. What is the solution? Don't use credit cards. If Americans were driving cars that exploded without warning and millions died every day, they'd stop buying cars and find another mode of transportation. Why is it that Americans insist on using a product that is intent on defrauding them and causing millions of families financial hardship? I am amazed at how difficult it is for people to get this concept.

Cash advance no debit card: Gain Financial Assistance without Debit Card

Cash advance no debit card: Gain Financial Assistance without Debit Card

Now, there is need to pledge your debit card as security with the lender because cash advance no debit card is free from collateral valuation process. You can secure required amount instantly without pledging your debit card. These loans are simply available in the market but to get the best deal systematic online research is desired. But to avail the funds by the cash advance no debit cardyou need to fulfill certain pre-requisite eligibility criteria. The criteria are as follows: o You must possess a valid bank account o Your age must be 18 years or more o You must be currently employed and earning income of £1000 per month o You must be UK citizen. After fulfilling above mentioned criteria you are able to avail the funds ranging from £100 to £1500 as per your specific requirements. The borrowed amount can be easily repaid within 14-31 days. As these loans are short term loans so you need to pay high interest charges to the lender. So, be careful in repaying the amount as delaying in payment can cause extra penalty charges.
These payday loans no debit cardare approved easily as it is free from all the prolonged formalities. This loan facility available with outstanding benefits likes no credit verification, no faxing procedure, no documentation, supple terms, hassle free loan application process and immediate approval. The approved amount will directly get credit in to your bank account in a less span of time.

These loans considered to be the best tool for availing appropriate fiscal support. Through these loans you can fulfill several short term requirements like credit card payment, paying grocery bills, education fee, pay house rent etc. Online mode considered to be the best technique to avail the funds on time with ease and comfort. Within next 24 hours your amount will get credit into your saving account.

All credit borrowers may easily apply for these loans as it is free from credit check and collateral valuation process. Now get instant cash approval without meeting tedious formalities.

Credit Card - Tips for Getting Approved

Credit Card - Tips for Getting Approved

Most card issuers charge you interest based on the date the money leaves your credit card, but some may base this on the date the transaction took place - up to a week before they pay the retailer.
Paying by Direct Debit is a good method of not forgetting to pay the bills. However some issuers may reserve the right to demand payment in full rather than a minimum payment if you abuse your credit card.

Although they are providing credit to you as a customer, credit cards are a buyers market. You should be able to negotiate interest rates and annual fees if you are an existing customer or have a good credit history.

Introductory interest rates act as a teaser to gain new customers. Often card issuers will make back this money by charging a much higher interest rate once the introductory period expires - make sure you aren't left with a large balance when the switch occurs.

Some card issuers are able to offer fantastic credit limits with a low interest rate. Read the small print - some issuers could charge you interest within the first month (sometimes double!) even if you pay off the balance in full at the end of the month.

Be careful of cash advances. Not only do higher interest rates apply to them, there is often a transaction fee of 2-3% and interest may be calculated from the day the cash is advanced.

Improving Credit Card Debt in 1 easy Step

Improving Credit Card Debt in 1 easy Step

If you have the credit card blues, a credit card debt consolidation loan will not only save you money but it can also reduce your debt. A debt consolidation loan will help you to pay off your debt in installments through a credit card debt consolidation plan.
Unsecured credit card debt can have very high interest rates. It is not unusual for a credit card to have an interest rate of 12.96 percent to 41 percent. It's recommended shopping around for the lowest rate possible. The lower the interest rates, the more money you will be able save. Credit card debt consolidation is for those have high credit card balances. This service actually will combine all of debtors credit card balances so that they can make one monthly payment.

Payment plans that Help Reduce a Persons Debt

Debt consolidation allows a person to have greater flexibility with their payment schedule. Many people do not realize that the longer it takes a person to repay a debt on a credit card, the more interest will build up. When credit card interest builds up, the debtor has to pay out more money. So, a person is actually paying almost double, if not more, than the purchase that was originally charged with the credit card. Fortunately, a person doesn't have to settle for paying high interest credit card debts for the rest of their lives. Debt consolidation is the first step to getting persons finances back on track and the next step towards financial freedom.

Another smart option is to apply for a long-term loan rather than actually consolidating the debt. This will stop a person from becoming enslaved by monthly credit card debt payments.

Many people do not realize that lower interest rates on credit cards can be secured with collateral. Those who do not own property a personal loan is the next best option.

When shopping around, make sure that you keep a careful look at the current APR. By looking at the APR, this will help one to calculate the cost of their loan payments. Smart credit card shoppers do not grab the first credit card that they see. Many people automatically assume that they have to stand on long lines at the bank or call the bank only to be placed on hold for several minutes. The fastest and one of the most reliable ways to shop around for the best interest rates is to search on the Internet. As you are conducting your search you and when you find a website, you can request an online quote. A representative will normally get back to you immediately or within a few short hours. After receiving your best credit card quote, you may simply choose the best credit card offer.

How Phase 1 of the Credit CARD Act Affects You

How Phase 1 of the Credit CARD Act Affects You

The first phase of the Credit CARD Act, signed in 2008, will go into effect starting August 20, 2009. There are a number of provisions, which will help to protect you, the consumer. Those reforms are as follows:

Changes to Credit Card Terms

Once this provision takes effect, credit card companies must provide written notice to customers 45 days prior to any significant changes to the terms of a credit card account, including an increase in the annual percentage rate (APR). The current law only requires a 15-day notice.

Note: If you have a credit card with an introductory rate, which was scheduled to expire after a fixed amount of time, this provision is not required. Also, if you sign up for a card with a variable interest rate, or fail to make scheduled payments on a reduced interest hardship plan, your creditor is not required to give you the same amount of notice.

Creditors are also required to advise you in the same notice of your right as a consumer to cancel your credit card before the changes in terms or raise in interest rate goes into effect. If you do so, the creditor generally may not apply the increase in APR or other changes to your account. You will be required to pay off the balance under the previous terms, and the card issuer is allowed to increase your minimum payment to as much as double your current payment.

Billing Rules

Currently, credit card companies are only required to mail your statement 14 days prior to the due date. With the enactment of the new law, creditors must generally mail or deliver you statement 21 days before payment is due. This is to help insure consumers will not miss payments because of delays in the mail, long weekends or other brief delays.

Also according to the Act, credit card companies must now accept any payment arriving prior to 5:00pm on the due date as "on time." Many creditors currently operate under a "morning deadline" rule, which counts any check arriving in the afternoon of the due date as "late" and therefore subject to late fees.

More to Come

You may have read about other consumer protections, like requiring individuals under the age of 21 to have an adult co-sign for a credit card, or requiring creditors to apply your payments to your highest interest debt first. These changes do not go into effect until next year. The next phase of the reform will be introduced in February 2010 and the remainder of the bill will be introduced in August 2010.

Starting in February, new rules will also prevent credit card companies from using billing "traps" like setting due dates on holidays or weekends, when payments are not accepted. Creditors will also be prohibited from changing due dates without warning. If your due date falls on a Sunday or a holiday when the US mail does not operate, the credit card companies will also be required to accept a check which arrives a day later as "on time."

August 2010 reforms include requirements for all gift cards to have expiration dates printed in caps directly on the card. It will also require credit card companies to allow borrowers to "earn back" their lower APR rates with steady on time payments.

While these reforms will help provide some relief to consumers from unfair practices, it does not absolve the consumer from responsibility when it comes to maintaining good credit. It is still up to the consumer to make responsible borrowing decisions, to make on-time payments and to manage their accounts. However, by doing away with some of the credit industry's trickier rules and requiring greater transparency in the process, it should be easier for you to hold up your end of the bargain.