Used To Get You into Credit Card Debt
You can’t blame the credit card companies. It costs quite a bit to loan the masses money and not everyone pays back timely. Some end up going into default or bankruptcy. Yet credit card companies continue to thrive because there is always one more refusing to heed good advice and never get into excessive credit card debt to begin with. So credit card companies must thrive as a business and they have tactics to get you to go into credit card debt and keep you there—even if only a little debt. Let’s look at a few of their tactics:
Offer promotional rates to open an account. This is probably the most attractive. You can get a credit card and carry a balance at a low interest rate. Or, you can transfer a balance from another credit card with a higher interest rate to a new credit card with a lower promotional interest rate. The problem is that if you make one mistake like be late on a payment, the promotional rate goes away and the default rate takes effect. The high interest rates cause the credit card debt to grow fast.
Use double-cycle billing. It used to be that all credit cards offered a way to avoid credit card debt by just using the standard 25-day grace period for repaying purchases. So those who always paid within that grace period effectively borrowed the credit card company’s money month after month and the company made no profit. Now some use double-cycle billing that has a customer paying interest on the balance in a previous cycle even if it was paid off in that same cycle.
No defense in court. One of the problems with people defaulting on unsecured credit card debt is that it is very expensive for a credit card company to build a court case to sue for repayment of it. A credit card company typically is not in the same state you reside in and they have to file a suit in a local venue. The court systems are slow. So they started inserting arbitration agreements in credit card terms. Now, you are forced into out-of-court arbitration proceedings instead of having your say in court. It is very beneficial for the credit card company. Your only other choice is to accept the credit card debt claim they have on you even if it was debt incurred because of identity theft or there are disputed charges.
They won’t stop when they should. So they can build credit card debt on you but there is a limit, right? That credit limit only applies to what you can initiate. If you miss credit card payments, they will continue to add interest. Are you over the credit limit because of interest and late fees? It is no problem for them and they will keep adding those feed to your credit card debt even if it goes over the credit limit.
