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Six Reasons That Can Stop You From Credit Card Application
There is a lot of information nowadays about credit card perks. It seems that everybody go crazy about credit cards. They are popular, they are convenient and they are lucrative. This is what the majority think about credit cards. But do not get fooled and paint the picture in bright colors. There are underlying potential problems and every card holder should know them. This is a short review.
1. The "universal default" clause that is becoming an integral part of every credit card agreement. What is it? A credit card issuer can automatically raise your interest rate (even if you are on time with the regular payments) in case you are late on other payments such as telephone bills, mortgage or another credit card. Or if the bank thinks you have taken on too much debt.
2. A credit card bank can apply any interest rate it wants. Even if you live in a state where there is an interest rate cap, a bank obeys the interest rate caps of the state it is chartered in. So, if you live in Minnesota where the maximum interest rate is 18%, a bank based for example in Utah, such as American Express, will charge you any interest rate it wishes because there is no interest rate cap in Utah.
3. A credit card issuer can charge you even if you are an hour late with your regular payment. And there is no limit to that as there is no limit to increasing the interest rate. After a 1996 legal case of Smiley vs. Citibank late payment fees increased from $5 to $50. And who knows what will happen in future?
4. Read the fine print. It is very important to read information in fine print of your credit card application. Not many people really do. Even consumer advocates and some credit cards executives admitted that the last time they read their credit card agreement was years ago. Which is more, these agreements are difficult to understand. Many credit cards users are not aware of the fact that a bank can change APR at any time, for any reason as long as they give a 15 days' notice.
5. Bankruptcy. Credit card debt. This is a nightmare of many Americans. But it is quite curious that bankruptcy is not usually a result of spending sprees. It is more connected to medical problems, divorce or job loss. Those, who face any of these problems, turn to credit cards as the alternative source of income. But if they do not find any other way of getting money they would very soon end up with a huge revolving debt.
6. Credit cards users are inattentive to their accounts. Many people apply only the minimum payment on their credit card debt. This strategy is totally wrong, because paying the required minimum you will never pay off your balance. Which is more the debt will increase, percentage rate will rise. Thus you will end up paying much more for the goods and services than you expected.
So, you need to think carefully before applying for a credit card, but do not be afraid. You only need to think rationally and be attentive. For, really, credit cards can offer so many benefits and turn out to be so much fun.
