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How to Navigate Interest Rates and Hidden Charges on Credit Cards |
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by: Debbie Dragon
One of the banes of the credit card industry is the fact that they charge exorbitant interest rates and fees on credit cards and other loans. They have no compulsion to do otherwise - this is the way they make money. Many times the borrower is left in such a poor financial state with each new credit card that it is almost impossible to dig out if they have fallen behind on the payments.
Often times the borrower feels that there is no way out but to file for bankruptcy. This should be the last resort, because there are still options for the borrower. And, even though the lenders put up a strong front of arrogance and being in control, the simple fact remains that they would rather settle with a customer than to become a party in a bankruptcy case in which they lose it all. It is a wise consumer who knows this and uses it to their advantage.
Before you sign up it is imperative to investigate each credit card offering for the rates, hidden fees and charges. Interest rates are set by the lender at their own discretion. They should be attached to the prime rate, but often are not. The rates are set upon on the credit-worthiness of the customer.
Hidden charges and fees are buried in the small print on the loan or credit card application and can keep a borrower frustrated when they try to pay large sums of money towards their balance.
While the smart advice is not to go down the road in obtaining a credit card in the first place, the reality calls for giving advice to those who have already done so.
Here is a startling fact: most people never read the fine print on the back of a credit card application. But that is what you must do in order to have an idea of what will happen to you and your money upon the generation of one of these accounts.
Never sign a credit application without reading ALL of the details. What you read will make you wary of what could happen to you should you default and not be able to make timely payments. This alone might provide the impetus to refuse to get a credit card in the first place.
Finally, if you find yourself in the position of not being able to make your payments, contact the credit card bank or institution. Maintain open conversations with them. Offer to work with them and you will probably find a listening ear. Most institutions already have programs designed to help those who are in trouble on their accounts. Make sure that your arrangements are on your terms, not theirs - AND IN WRITING. Never give a creditor you bank routing number and account number of your checking account so that they can automatically withdraw a payment from your account. That is a recipe for disaster. Do not agree to a payment program that puts you on a small minimum for a few months without lowering the principle.
Get the lender to lower the interest rate immediately. Have them freeze the account so that no more charges can be made. Then, begin to make as large of payments as you possibly can. If you find that you cannot make headway because of the hidden monthly fees, call them and find out if those can be suspended as well so that you can pay off the card or loan.
In this manner, you can make progress in freeing yourself from this type of credit.
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Credit Card Articles > Fees and Penalties > How to Navigate Interest Rates and Hidden Charges on Credit Cards
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