Understanding Debt - Credit Cards Part 1
First Time Visitor? Welcome
FinancialLearn.com is dedicated to finding great deals, free stuff, and promote frugal living. We are delighted to have you here.
Sound Fun? Have our articles delivered to you via RSS Feed or E-mail to be reminded of new and upcoming contests and articles.
“The ultimate ignorance is the rejection of something you know nothing about and refuse to investigate.”
Dr. Wayne Dyer
There are 641 million credit cards in circulation in the United States, That works out at over two cards for every man, woman and child of the population. This plastic mountain is responsible for $1.5 trillion in spending. Moreover, the average family is in debt to the tune of $8,000 to the credit card companies, which are ultimately the banks. According to Ed Yingling the President of the American Bankers Association, profit from this ever-growing industry is $30 billion per year. He feels it is fully justified because credit card lending is unsecured lending and this puts the lender at huge risk. Thus his risk justifies the profit. To cap it all the credit card industry is a free for all, because it is completely unregulated in the US.
The first credit card
Diners Club issued the first credit card way back in 1951 but the take off in credit cards did not fully emerge until 25 years ago. Besides, those early supposed credit cards were actually charge cards. It was not until a quarter of a century ago that the Banks managed to persuade the government to deregulate lending. Up to that time there had been a cap on the amount a lender could charge a borrower in interest. This was removed and the market became very lucrative for purveyors of credit cards who can easily get away with annualized APR of 20% and in some problem cases this is capable of growing to 30%.
Deceptive Tactics
Credit card companies very often resort to deceptive tactics to increase the amount of money they can squeeze out of their very often dissatisfied customers. It pays to read the fine print very carefully when you take out a card. Often there are penalty fees for late payments and the possibility of interest hikes if a single payment is late.
Deadbeats and Revolvers
The credit card companies to describe their customers use these disparaging terms. A “deadbeat” is their least favorite customer because he/she pays off all owings at the end of the month. To discourage this practice some credit card companies have introduced an annual fee for such users. If you are going to use a credit card this is the way to get benefit from the convenience carrying plastic money. Use it for convenience purchases, avoid the crippling interest charges and pay off the debt at the end of the month. If the credit card Company charges you a fee, look for another company.
Revolvers, are the favored customers: There are 115 million of them in the United States. They don’t pay off the debt at month end, these are the people who carry credit card debt and they pay a high price for the privilege. Don’t be a revolver, make it a financial objective to discharge credit card debt like this as soon as you can.
Related Posts
- Understanding the Debt Cycle - Credit Card Rip Off
- Debit Cards 101
- Introduction to Credit Card Debt
- How to Compare Credit Cards
- Understanding Debt - Using Credit Cards to Buy Food
- Buy Now Pay Later Mentality
- Bank Alternatives - Social Lending Networks
