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Recent reports suggest that American consumers have recently hit a scary milestone. According to the Federal Reserve, Americans have the highest outstanding debt, mostly in the form of credit card debt than ever before. In June 2017, Americans owed $1.022 trillion in revolving debt and this figure even beats the record set in 2008 April when consumers owed a collective amount of $1.02 trillion in revolving credit. This record serves as a warning signal for Americans to focus on credit card debt. Even when you feel the debt is manageable; know that there could be a sudden emergency that can keep you away from a real mess.
So, what are the few things that the credit card companies don’t let you know so that you fall deeper into the vicious cycle of debt? If you don’t want to deceive yourself and fall prey to few emergencies, you should know the different things that the credit card companies don’t want you to know. Here are few points that you should know.
#1: No government law sets an APR
While your credit card can have a maximum interest rate which is mentioned in the place of “terms and conditions”, there isn’t any legal cap actually. There are various states which have usury laws that regulate the loan interest rates but they are only applicable to the banks within the state. This is why the biggest credit card companies are imbibed in North Dakota, Delaware, which are the 2 places where there aren’t any usury laws.
#2: Fixed interest rates aren’t always fixed
Even if you make timely payments, the fixed interest on the credit card can be increased any time when the company feels like doing it. The card issuers only require giving a 15 days notice about the change of rate. Hence you should always go through any correspondence from a credit card company if you want to avoid any harmful surprise.
#3: Being late on 1 card could raise the APR on all cards
If you could just end up with 1 late payment, you could incur a penalty rate on all your cards, even though you may have been times while paying the balances on the other cards. So you should monitor all your accounts and remember the due dates of each of the cards so that you don’t make a single late payment. You will most likely be stuck with the high APR for few more months, but as per the CARD Act, issuers of credit cards should reconsider the penalty of a cardholder post 6 months.
#4: Paying off your balance early hurts your credit, is a myth
This is one of the most famous myths and if you maintain a balance on your card, this wouldn’t even improve your credit score. In fact, if the balance is pretty high, this could actually hurt your score. Your priority should be paying on time and then you should focus on interest payments, late payments, and damage to credit.
Therefore, if you’re wondering about the different ways in which you can stay out of debt, first know about the things that the credit card company doesn’t want to let you know. Just make sure you take steps accordingly.