Americans have over the span of the last 3 decades fallen in love with credit cards. The allure of plastic money has taken over the American psyche, partaking in a healthy dose of borrowing. However, the past few years of low interest rates has caused consumer debt to reach record levels.
The incomes of majority of American households are tied to monthly credit card debt payments. The American love affair with plastic money has grown unabated over the years, the lure of easy money. The amount of credit card debt has almost tripled in the last two decades, leaving many US households with unending debt; consumers are mired in a quicksand of high interest rates, fees, and penalties. According to the Federal Reserve Board (Fed), credit card debt was $238 billion in 1989 and rose to over $800 billion in 2005.
As households have made credit cards more of a commonplace, they have become more complicated. At one time cards were simple tools like any fixed-payment installment loan. But that is no longer the case; the once simple tools have become viral, morphing continually into more complex mechanisms. And similar to mechanics of viruses, credit card companies find new inventive ways to adapt to and circumvent new laws.
It doesnt seem that long ago, when credit cards applied a single annual percentage rate (APR) to various credit card features such as purchases, payday cash advances, or others. Credit card fees were also limited to being an annual card member, cash advances, or perhaps late payments.
However, today with so many divergent features and offers, credit cards have become too complex. Many credit cards treat different classes of purchases, balance transfers, and cash advances as different features of the same card, each with its own APR.
The APRs increase if you miss payments, respond faster to market conditions, and the cardholders credit risk profile. Somehow, cardholders that pay their bills on-time, in full and consistently are never rewarded with lower of interest rates.
Credit card companies monitor credit scores, credit reports, credit card debt history, and perform other credit checks of current and prospective customers and vary their services accordingly. For it is, they rather target consumers who carry over balances month-to-month rather than consumers who pay their entire bills at the end of the month. Credit Card companies nowadays make more money from various fees than interest on balance.
Ultimately, card companies want consumers who arent that financial savvy, so that they can exploit them for profit. A perfect example, credit cards in the last few years have set up their aggressive marketing efforts to prey upon college students. Consequently, the national credit card debt has led to mushrooming in credit counseling, debt consolidation services, online credit report companies, debt counseling, credit card consolidation, and consumer credit services. These services provide consumers saddled with debt or credit card debt to get their life back on track by helping them eliminate their debt. It is critical that before you sign up for the above services, make sure it is a reputable credit repair or debt counseling service provider.