Lenders have been known to raise credit card interest rates, simply because a borrower makes no more than the minimum monthly payment. These lenders feel that this is occurring because the borrower may be financially overextended. To the lender this indicates an increased risk.
Many credit cardholders are under the false impression that a 0% interest card is a good deal. This is, in fact, untrue. Even though they may use a card yielding 0% interest, for a specific period of time, studies indicate that most borrowers who hold low interest cards typically overspend when making purchases.
An estimated 90 million American's don't pay their monthly credit card balances, in full. Credit card companies love this because billions of dollars of their profit is credit card interest. Top interest rates are higher than ever before. (Many say higher than typical ‘loan shark’ rates. ) Some lenders are charging 35% interest, in certain cases.
Borrowers that are being charged these exorbitant rates are facing a financial disaster. Simply missing one payment, late fees can lead to over limit fees, should the account be close to the limit, in the first place.
Credit card issuers learned early on that offering borrowers a lower monthly payment while increasing their overall credit line, at the same time, only increases their profits. Nine times out of 10, these borrowers would quickly make additional purchases that again brought them to their credit limit. This, of course, resulted in higher payments and additional credit card interest.
Credit card issuers are not fond of borrowers who religiously pay their entire balance, each month. Ironically, these borrowers are often referred to as ‘deadbeats’. The majority of profits come from those with the higher rates and higher risk.
There are basically two groups when it comes to credit cards . . . those who live with them and those who can't live without them. It's up to you to decide which group is for you.
Tom Bates, CDA
CEO - President
Absolute Debt Solutions
Absolute Credit Repair