What you Must Know About Credit Cards

By: Martin Lukac

Most people today have at least one credit card, but many don't fully understand how their card company works. To know this, you need to look into your agreement with your credit card issuer. You know -- the fine print below the interest rate that you never read.

The average consumer has no idea that if you make your credit card payments on time, your rate could still increase. All you have to do is make a late payment anywhere. The Universal Default Clause says that you must be in good standing with all your credit accounts. Your credit card companies are checking your credit report every month to see if you have missed any payments. They can also increase your rate if it looks like your debt-to-income ratio is getting too high. Your charging to your credit cards can actually result in a higher interest rate. This is generally seen in every credit card agreement today.

You can be charged any amount for late payment fees and penalties. There is no limit. There used to be, but a 1996 Supreme Court ruling wiped these limits out. Many credit card users will see late fees of up to $40. The credit card companies generate a lot of income from these fees and penalties.

There is also no federal limit on the amount of interest you can be charged on your credit card accounts. Have you ever noticed that all of your credit cards come from the states of Utah, South Dakota or Delaware? That is because the usury laws are nonexistent in these states. There is no national usury law that will protect you from high interest rates. Get into debt, and you face the chance you will pay unreasonably high rates. Many accounts in default see interest rates of over 30%.

There are a lot of people out there that simply assume that they are doing well by paying the monthly minimum. You are, but you aren't doing great. Approximately 35 million consumers only pay the minimum monthly payments on their credit cards each month. This means that they will pay for years and pay more than the cost of the original item they purchased. Learn to speed up this processes through creating a debt elimination plan.

It is vital that you read your entire credit card agreement. I know people who were shocked that it had to do with their account. They simply thought it was legal talk. Well it is -- legal talk that affects your credit card account. There are clauses in there that will allow your interest rate to be changed without any reason. How much in interest you pay will depend on the stated grace period. There are many important terms in the fine print that should not be overlooked.

A credit card is just like any other loan you take out. You must know the terms. You wouldn't, hopefully, take out a mortgage and never read a paper or ask about the interest rate and terms. So why would you treat a credit card account in this manner. You may say that there is a difference in the money amounts you are borrowing. However, by paying only your minimum payments each month, you can easily exceed your total mortgage payment over the years.

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