Reasons Why You Can't Afford to Continue Carrying Credit Card Debt!

If you're like most Americans, you're probably carrying more than $5,000 in credit card debt. Although credit cards offer a lot of convenience and it's a good idea to carry at least one, the cost of that convenience continues to go up. Recently many credit card companies have come under scrutiny by lawmakers in Washington. Several credit card executives have been called in to testify before a Senate panel to explain some of their current practices. Practices that some lawmakers believe to be unfair. Some of these practices, like raising people's interest rates for no reason, and charging interest on accumulated fees have become a big issue. If you're carrying high balances on your credit cards, after reading this article you'll probably want to pay them all off, cut them up, and throw them away. Here are some of the reasons why you can't afford to continue to carry credit card debt.

Credit card disclosures.... have you ever tried to read the terms and conditions of your credit cardholder agreement? Probably not, because if you did you probably won't have agreed to carry their credit card. The trouble is, in order to keep people in the dark credit card companies issue disclosures packed full of small print in a language no one has mastered yet. And once you sign your name on the bottom line, you essentially agree to all the terms and conditions, which allows them to basically do anything they want. So if you don't completely understand your credit cardholder's agreement, don't worry you're not alone.

Fees, Fees, and more Fees.... Cash advance fees, late payment fees, and over the limit fees to name a few. Any fees that you accumulate are added to the outstanding monthly balance. By adding the fees to the outstanding balance, credit card companies are able to charge you interest on those fees. So you're not only paying interest on the balances you carry over from month to month, they're even charging you interest on the fees. That should be illegal! Many credit card companies even charge you a fee to make a payment by phone. As far as the over the limit fee, it's charged to you when you go over your available credit limit. In order to go over your available credit limit the charge has to be approved by your credit card company. So in other words, they will allow you to go over your credit limit just so they can assess you a fee for doing so. Talk about a double standard!

Grace Periods.... a grace period applies from the time you receive your bill till the actual due date arrives. So if you pay your balance in full every month, the grace period applies to the short period of time before interest starts to accrue. However if you carry a balance from month to month there is no grace period, new purchases will actually begin to accrue interest immediately. In the past the grace period would still apply to new purchases with interest only being applied to the carryover balance from the prior month. Not so anymore! So unless you pay your balance in full every month you don't have a grace period anymore.

Two Cycle Billing.... many credit card companies today use two cycle billing to compute the balance subject to interest. If your credit card company uses this system, you're paying more. Also known as double billing, the credit card company uses the last two months worth of charges to figure your balance, whether you carried a balance the prior month or not. So in other words they can be using a balance you carriied two months ago to determine your finance charges today, even if last month you had no balance. I can't wait to see how they explain this one to lawmakers in Washington!

Trailing Interest.... this refers to the interest that you accrue while your payment is in the mail on the way to the credit card company. Yes even if your payment is received prior to the due date! Once again if you carry balances from month to month, you simply do not have a grace period any longer. So technically you are still being charged interest from the time the billing cycle and it until the payment is received, even if they receive the payment by the due date. Are you getting sick of your credit card company yet?

Musical Interest Rates... don't be surprised if one day you receive your statement only to find out that your interest rate has gone up. Even though you accepted your credit card because it had a low fixed interest rate, your credit card company can legally raise your interest rate anytime they want without explanation. Sound ridiculous! Well it's true, if you've got a few days try reading your credit cardholder agreement. Almost every credit card company out there has a clause in their cardholder agreement that simply states interest rates are subject to change, and often times they are only required to give you a 15 day notice. Of course you can choose to not except this policy, but if you disagree they will close your account and you will be unable to make new purchases with that card. If you pay your bill late they will raise your interest rate every time.

How your Payment is Applied.... if your balance has multiple interest rates apply to it, for example 8.9% on a balance transfer and 12.9% on purchases, your payment will be applied to the lower interest balance first. Once again another practice to ensure more of your money ends up in their pockets.

Although these practices do not reflect every credit card company out there today, the sad truth is most credit card companies do you use these tactics. So when you consider all these charges being applied to that little convenient plastic card, you got to ask yourself a question, can I afford this? For most people the answer is no. This would be a good time to find out if the credit cards you carry are charging you these fees. If so, this might be a good time to pay them off and get rid of them. These are just some of the reasons why you can't afford to continue to carry credit card debt.