Do credit card debts scare you? Are your debts getting out of
hand? Take the first step to getting your finances under control by reading this
excellent article.
It Is In Your Best Interest To Do The Math On Your Credit
Card Interest
By
Terry McDermott
If you begin foaming at the mouth once a month when you
receive your credit card statement, join the millions of Americans that are
foaming along with you. There is a growing outrage at the seemingly endless
journey towards eliminating the balance on your credit card and that is due
primarily to the extravagant interest rates charged by credit card companies.
Your bank is probably touting the super rates it offers on Certificates of
Deposit or CDs. “Just deposit $5,000 for 6 months and we’ll give you a
‘whopping” return of 2.83%.” Yet, in contradiction to the low rates banks are
willing to pay you for the use of their money, the interest on credit card rates
can be 10 times the amount offered on a CD. Why?
The interest rates on savings accounts and CDs are based on competition, the
cost to the bank of borrowing money and the expected return on investment to the
bank for the use of your money. Because a savings account is liquid, the bank
does not know from day to day how much of your money will be available for its
use. A CD, on the other hand, requires that you place your money in the bank for
a specific amount of time. The longer the time period, the higher the return.
That is because the bank has greater flexibility with your money and knows
exactly how long they have to work with it.
Credit card companies have been highly successful at convincing government
regulators that they need higher interest rates to protect themselves. As
opposed to a mortgage loan or home equity loan, credit card companies claim that
they do not have any collateral to “secure the loan” they provide to consumers
that use their credit cards. If a customer defaults or files for bankruptcy, a
credit card company had little recourse to recover the balance due on a credit
card account. But a recently passed law now makes it much harder for individuals
to eliminate all of their credit card debt by filing personal bankruptcy. Many
think this is an unfair advantage for the highly profitable credit card
companies.
These companies can be their own worst enemy. Every day consumers throughout
the country receive an avalanche of credit card offers that make promises of low
interest and high spending limits. Many of the recipients are already strung out
with other debts but the credit companies still offer and then provide these
high-risk individuals with the desired credit. Talk about using gasoline to try
and extinguish a fire.
The practice of paying with plastic can be seductive and addictive and the
credit card companies are well aware of it. It is obvious that these companies
are doing quite well. They use loopholes to gradually increase interest rates
and capitalize on the deceptive “minimum monthly payment” scheme to string
consumers along. If you have an ounce of wisdom, you will pay close attention to
the credit card offers you receive and the progress of your interest rates as
you go month-to-month. It is a quite simple matter to let things get out of
control and find yourself at the mercy of Visa and MasterCard.
Terry McDermott is the administrator of a variety of specialized websites.
Two of these websites are focused on financial issues. They are Investing and
Finance Central at
http://www.investing-and-finance.com and Advantage Payday Loans at
http://www.advantagepaydayloans.com
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