It Is In Your Best Interest To Do The Math On Your Credit Card Interest
If you begin foaming at the mouth once a month when you receive your credit card statement, join the millions of Americans that are foaming along with you. There is a growing outrage at the seemingly endless journey towards eliminating the balance on your credit card and that is due primarily to the extravagant interest rates charged by credit card companies.
Your bank is probably touting the super rates it offers on Certificates of Deposit or CDs. "Just deposit $5,000 for 6 months and we'll give you a 'whopping" return of 2.83%." Yet, in contradiction to the low rates banks are willing to pay you for the use of their money, the interest on credit card rates can be 10 times the amount offered on a CD. Why?
The interest rates on savings accounts and CDs are based on competition, the cost to the bank of borrowing money and the expected return on investment to the bank for the use of your money. Because a savings account is liquid, the bank does not know from day to day how much of your money will be available for its use. A CD, on the other hand, requires that you place your money in the bank for a specific amount of time. The longer the time period, the higher the return. That is because the bank has greater flexibility with your money and knows exactly how long they have to work with it.
Credit card companies have been highly successful at convincing government regulators that they need higher interest rates to protect themselves. As opposed to a mortgage loan or home equity loan, credit card companies claim that they do not have any collateral to "secure the loan" they provide to consumers that use their credit cards. If a customer defaults or files for bankruptcy, a credit card company had little recourse to recover the balance due on a credit card account. But a recently passed law now makes it much harder for individuals to eliminate all of their credit card debt by filing personal bankruptcy. Many think this is an unfair advantage for the highly profitable credit card companies.
These companies can be their own worst enemy. Every day consumers throughout the country receive an avalanche of credit card offers that make promises of low interest and high spending limits. Many of the recipients are already strung out with other debts but the credit companies still offer and then provide these high-risk individuals with the desired credit. Talk about using gasoline to try and extinguish a fire.
The practice of paying with plastic can be seductive and addictive and the credit card companies are well aware of it. It is obvious that these companies are doing quite well. They use loopholes to gradually increase interest rates and capitalize on the deceptive "minimum monthly payment" scheme to string consumers along. If you have an ounce of wisdom, you will pay close attention to the credit card offers you receive and the progress of your interest rates as you go month-to-month. It is a quite simple matter to let things get out of control and find yourself at the mercy of Visa and MasterCard.
Terry McDermott is the administrator of a variety of specialized websites. Two of these websites are focused on financial issues. They are Investing and Finance Central at http://www.investing-and-finance.com and Advantage Payday Loans at http://www.advantagepaydayloans.com
MORE RESOURCES:
 Calgary Herald | Bush: US will work with partners on credit crisis The Associated Press - WASHINGTON (AP) — President Bush says world's wealthiest industrial countries will work together to attack the credit crisis spreading around the globe. ... G7 seeks to halt global crisis Bush says financial crisis needs coordinated response US pleads for patience in crisis repair efforts |
 Boston Globe | Global leaders seek answer to credit crisis San Francisco Chronicle, USA - At the same time, loan markets everywhere remained broken, especially the critical wholesale credit markets, in which financial institutions lend each other ... Video: Bernanke: More Economic Pain Ahead TREASURIES-Surge in Europe as shares skid on credit woes Stocks down despite government moves to free up credit |
 The Associated Press | US will work with partners on credit crisis: Bush CBC.ca, Canada - It was the 21st time in 26 days that the president has spoken publicly about the credit crisis gripping financial markets and dragging down stock markets. ... Meeting G7, Bush Vows World Economic Fix |
 Calgary Herald | High anxiety rules Wall Street as global credit crisis deepens Emirates Business 24/7, United Arab Emirates - High anxiety on Wall Street will not subside this week as the deepening credit crunch pushes the international economy into recession and corporate profits ... Video: Stocks Fluctuate After Fed Corporate Debt Plan Easy credit and financial crisis G-7: We're Working On It |
 New York Times | Lehman Credit-Default Swap Payout Could Climb as High as $365 Billion Washington Post, United States - By Heather Landy NEW YORK, Oct. 10 -- In what may shape up to be the most expensive payout ever in the credit-default swap market, sellers of insurance ... STOP FINANCIAL WMD'S: Credit Default Swaps Insurance on Lehman Debt Is the Industry’s Next Test Lehman Credit-Swap Auction Sets Payout of 91.38 Cents (Update1) |
Is my credit union safe? Los Angeles Times, CA - By E. Scott Reckard, Los Angeles Times Staff Writer The government-run National Credit Union Share Insurance Fund insures most deposits at credit unions, ... Got Your Money in a Credit Union? You Too Are Safe In tumultuous financial times, credit unions might be an option to ... LETTER: Your money is safe with credit unions |
 Los Angeles Times | Fears Grow That Tight Credit Could Crush GM, Ford NPR - Standard & Poor's downgraded the credit of both companies and their financing arms this week. AFP/Getty Images Ford F-150 trucks sit at a dealership in ... Video: Money Minute: GM, GE, Oil GM, Ford too big to fail? CREDIT WATCH HITS GM, FORD |
Financial troubles spread to credit unions Los Angeles Times, CA - By E. Scott Reckard, Los Angeles Times Staff Writer It's not just giant banks on the brink these days: Losses are clobbering nonprofit credit unions that ... |
 Citizen | Credit Crisis Collapse What Happens Next? The Market Oracle, UK - To not take actions to stem the credit crisis would be that major policy mistake which would compound all the other mistakes. I think everyone knows the ... Regional financial experts focus on lending; say credit crunch is ... Market news this week for strong stomachs You have some input on interest rates |
 Voice of America | IMF endorses G7 plan to fight global credit crisis CTV.ca, Canada - The International Monetary Fund is backing a plan by Canada and the other G7 countries to fight the worldwide credit crisis, which continues to play havoc ... Video: IMF: Timing right for G7 Credit CRISIS ALERT Press demands some G7 credit crunch punch |
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