Credit card debt is one of the most predatory and insidious lending systems currently permitted in the United States. With the exception of payday lenders or check-cashing services, credit card companies charge the highest interest rates and most exorbitant fees of any lenders in the country.
Consumers often rely on credit cards for major expenses, only to eventually realize that they can no longer cover their payments. Credit card debt can reach a point where it forces people to file for bankruptcy to regain control over their finances.
How do credit card companies help to keep people trapped in a cycle of increasing debt and imbalanced budgets?
With deceptive special offers
Credit card companies often offer very generous introductory offers for new customers. They may also offer balance transfers to existing customers. These offers often come with low interest rates or a promise of no interest paid on certain purchases or transfers. However, credit card users often fail to check the fine print on these offers. Frequently, they must pay the purchase or transfer off in a certain amount of time or become responsible for all the interest that accrued from the original date they acquired the debt. There may also be a flat fee assessed for a balance transfer that the company rolls into the amount owed.
With excessive fees and high interest rates
People generally know that they have to pay an interest rate of 20% or higher on their credit card balances. They may simply accept that as a necessity and may try to keep their balance as low as possible. Sadly, the combination of interest charges and other fees might mean that they don’t have enough money in their budget to pay the account down to zero each month. Credit card companies may charge an annual fee to maintain an open line of credit. They may assess a fee for late payments and going over the credit line limit. Those fees can quickly add up, and the borrower usually accrues interest on those fees just like they would on a purchase.
With cash advances
Credit cards used to only offer payment at the point of sale. However, credit card companies now also offer cash advances. People can get cash back when conducting a transaction and may have to pay an even higher interest rate on that cash advance than they do on standard purchases. By making the offer at the time of every checkout transaction, credit card companies may sometimes trick people into taking a cash advance just like they would take money from their bank if they paid for that transaction with a debit card.
People who intend to be responsible with their finances may find that their credit card balances spiral out of control due to company policies. Filing for personal bankruptcy can help people end aggressive collection efforts and discharge the high balances that they currently owe to their credit card lenders.
