Banks use a plethora of devious tactics to ensure you don’t pay off your debt. Why? Simply, your debt equals their profits. Huge profits. So huge in fact, the credit card divisions are the most profitable sector of banking.
I should know. I was the man. Or at least I worked for him. For years I was one of them, but now I’m on your side. And I’m fighting with you to revolt against these criminals, who are effectively stealing your money, our money, to take back what’s rightfully ours.
The industry refers to me as a “deadbeat” – someone who pays off their balance in full every month. They make no money off of me. Ed Yingling, president of the American Bankers Association, labels you a “revolver,” the “sweet spot” of the banking industry – the industry’s most profitable customers.
My goal is to help turn you from a revolver into a deadbeat. In the process, saving you money, by taking away theirs.
With that, here are 5 misleading strategies aimed at keeping you a revolver.
Deception #1 – Minimum Monthly Payments
Setting the payment due to only 2% of your outstanding balance.
Effect – They con you into thinking that you’re making progress in paying down your principle, but in fact you are falling into their trap of keeping you in debt.
Deception #2 – Default Terms
Detailed in the fine print of cardholder agreements. Can be changed at any time for any reason with 15 days’ notice.
Effect – Defaulting will not only lead to excessive penalties and fess, but also likely result in a hit to your credit score.
Deception #3 – Interest Rate
A clause that allows the company to change your interest rate (APR) at any time, for any reason, as long as they give you 15 days’ notice.
Effect – This allows them to change the price even after you’ve bought the item.
Deception #4 – Universal Default
The credit card company can raise your interest rate even if you make your payments on-time, if you are late on payments elsewhere including other credit cards, house or car payments, phone bills, or even if they feel you have taken on too much debt.
Effect – Higher rates equal more interest.
Deception #5 – Late Payments (and this one’s a doozy)
Setting your payment due date on Sunday or a holiday with the hope that you’ll have a late payment.
Effect – Late payment fees and compounding interest.
Credit card critic Elizabeth Warren, who is also a Harvard Law School Professor, says that credit card contracts have become “a thicket of tricks and traps.” She also refers to the industry as “the new loan sharks.”
“…even though people who are already in trouble are likely to default, there is a whole other category of credit card issuers who are likely to become profitable for credit card issuers; those who usually pay off their balances every month, but because of the recession find themselves needing to go into debt. That ability to do so may be costly, and surely will breed resentment, but it will also wind up saving the credit card companies. Heads you lose, tails they win.”