Credit Card Companies & Credit Card Debt
Credit card debt is the most common contributor of debt for most people; however, very few people know exactly what credit card companies are allowed to do and not allowed to do when it comes to their credit. Understanding what boundaries credit card companies must abide by can help you to become one step closer to better managing your debt.
First, it is important to understand that contrary to popular opinion credit card companies have the absolute right to raise your interest rate automatically. They can even raise your interest rate if you’ve never been late on a single payment for that credit card. If you are late on any other bill credit card companies can use what is known as a universal default clause to raise the interest rate on that credit card.
Due to increasing public service announcements many people are beginning to understand that their credit score is more important than they may have thought, especially in terms of applying for additional credit. What you may not know; however, is that your credit score can also help to determine the interest rate on your credit cards. The lower your credit score, the higher your credit card interest rate is more likely to be.
What you need to know about credit card companies
Many people may also not understand that credit card companies are not bound by any limits in terms of what they can charge for late payment fees as well as penalties. You may think there is a cap on such items, but in reality the limits were lifted back in 1996 after a monumental Supreme Court case was settled.
In addition, the Federal government does not place any limit on the amount of interest that credit card companies can charge you. Many people believe that credit card companies cannot charge them more than a certain percentage due to government usury laws.
The truth is that these laws were lifted a long time ago, after the Great Depression, as a matter of fact. Furthermore, certain states have usury laws that are either very lax or non-existent. With these type of leeway credit card companies practically have free reign to charge you whatever they want.
Finally, be aware of the fact that it is not big item purchases such as cars and homes that land most people in bankruptcy court. Rather it is credit card debt that causes most problems, simply due to the high interest rates that make it incredibly difficult and time consuming to pay them off.