The Credit Card Traps Revealed
Credit cards are an alluring trap invented by our modern financial system.
IF you have the money to pay off the credit card when the statement arrives, using the card is not bad.
But, buying with a credit card when you don't actually have the money, means you are committing your future income to the credit company under the threat of a bad credit rating. That is financial slavery.
During the past several years, debt consolidation experts have helped a lot of people to get out of the credit card trap with debt relief plans. That alone speaks volumes about how serious the situation is. Assisting people to do this is frowned upon by the credit lenders; after all, they lose all that profitable interest. The credit companies create more enticing offers to hook consumers back in with offers like 0% interest for extended periods of time.
Are they really giving you 0% interest? You are IF you can pay off the whole amount in advance of the expiration date of the offer. What they are hoping is that you will NOT have the ability to pay it off.
What happens if you can't pay? Carefully read the fine print details on their 'Terms and Conditions' agreement. Most agreements have a relatively low interest rate in big print; 9.99% to 12.99% is fairly standard. But, watch out for variable rates, meaning it is the 'lower' rate PLUS the 'prime rate.' The banks charge the prime rate to the credit company to lend them the money, and that gets passed on to you. This can add a whopping 6 - 9% on top of that seemlingly low interest rate.
Read further and you'll see the rest of the trap. If you pay late or miss a payment, they have the right to jack up the interest rate to as much as 39%. IN ADDITION, they are allowed to add an additional $25 - 39 late fee. If you owe a balance of $1,000, that is $52 - 66 a month in interest and fees you are required to pay before you pay even one dollar on the price of the item you charged.
What else do the credit companies have in their arsenal of weapons to make sure they continue to make interest money from you?
First is that enticing 'minimum payment' they offer which is mostly interest, and hooks you into a payment plan that will take you 20 years to pay for what you bought. Second, the credit companys are now using invitations to get cash back from retailers or earn airline miles for each dollar you spend.
Who pays for that? Right! You do! The credit companies charge the stores for the cash they give you back, and then raise the price you pay.
The credit companys pay the airlines a tiny amount for each airline mile they 'give' you when you charge an item on the credit card. On January 1, 2007 in an NBC TV news interview, the president of a major airline said that it costs the airline company $10 to fly you somewhere when you have earned 25,000 air miles to take a flight.
Who actually benefits financially if you charge up your credit cards to earn a 'free' flight? It should be obvious that trap is disguised as a huge benefit to you.
Sandra Simmons, President of Money Management Solutions, has years of experience helping company owners and private individuals manage their income to achieve their financial golas. To learn more about the Money Management Software she created, watch the FREE 5-minute demo video on her website at www.MoneyMgmtSolutions.com
Published January 20th, 2008
