Credit Card Debt And Penalty Rates


Credit Card Debt Can Easily Get Out Of Control. What Are Penalty Interest Rates?

Very few people actually read the credit card contract they sign when they apply for a card. It provides, if you carry an unpaid credit card debt balance you can end up paying increased interest charges when you fall behind in your payments. If you do not pay off your balance promptly your balances become a very high interest rate loan. Most cards have introductory interest rates of only a few percentage points as long as you are making your minimum payments. Miss payment, or two, and those introductory rates turn into “penalty rates” and jump up to as much as 23%. Financial penalties imposed on top of the increased rate. If you have several cards a default on one can trigger “penalty rates” to trigger on all of them.

Don’t Be A “Deadbeat.” Banks Love Credit Card Debt.

Banks call people who pay off their balances each month “Deadbeats.” They like “deadbeats” and don’t mind their falling behind. Banks earn huge profits from consumers who consistently maintain monthly balances while making only minimum payments. They make even more when you fall behind!

A $10,000 outstanding credit card balance, at an 3% introductory rate, generates interest at $300.00 a year. Paid off over a year it is only $25.00 a month. But, at the 23% penalty rate it rises to $28,00.00 a year or $191.66 a month. To pay the $233.33 you will need to earn $239.58 so that, after taxes and Social Security are deducted, you have enough money to make the minimum interest payment. For most people, once credit cards balance reach $20,000.00 (interest at $383.32 each month) serious financial harm occurs. People have a hard time meeting their monthly living expenses.
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