The Credit Card Trap - What You Need To Know

An inviting trap created by our modern-day financial system, credit cards can be harmful to you financial health

Using a credit card is not bad IF you have the money to pay off the balance each month.

However, purchasing things with a credit card because you don't have enough money is simply promising your future to the credit company. That pay-for-life program is also called economic slavery.

During the past several years, debt management experts have assisted many people to escape from the credit card trap with debt relief plans. That alone speaks volumes about how serious the situation is. Even the government has gotten into the act by bailing out some of the largest banks, insurance agencies and corporations in the United States.

Assisting people to escape the credit trap is frowned upon by the credit lenders; after all, they lose all that profitable interest. |they lose all that profitable interest.

How do they counter the attack on their profits? They simply create more enticing offers to lure consumers back into the trap by offering programs like 0% percent interest for extended periods of time.

Are you really getting 0% interest? You are IF you can pay off the whole amount in advance of the expiration date of the offer. What the credit company is hoping for is that you will NOT have the ability to pay it off.

If you can't pay, what happens then? Be sure to read the fine print details carefully on their 'Terms and Conditions' service agreement. Many of these agreements have a relatively low interest rate in big, bold print; typically it is 9.99% to 13.99%. But, watch out for the fine print where it says it is a variable rate. What that really means is that it is the 'lower' rate PLUS the 'prime rate.' The banks charge the prime rate to the credit company to lend them the money, and that gets passed on to you. That can add a staggering 5 - 9% in interest on top of that seemingly attractive interest rate.

Read deeper into the fine print disclaimers and the rest of the trap is revealed. If you pay late, or miss a payment, the credit company has the right to increase the interest rate to as much as 39%. IN ADDITION, they are allowed to add an additional $25 - 39 in fees. If you owe a balance of $2,500 on a card, that can generate $56 - 83 a month in interest and fees you are required to pay before you pay even one dollar on the price of the item you bought on credit.

What other tricks do the credit companies have in their tool kit to ensure continue to make interest from your borrowing?

That enticing 'minimum payment' they allow you to make is mostly interest, and hooks you into a payment plan that will take you 20 years to pay for what you bought. Next the credit companies invite you to get money back from stores or to earn airline miles for each dollar you charge to the card.

Who do you think is paying for those credits? Right! You do! The stores pay the credit companies for the cash they give you back, and those same stores raise their prices to cover the cost.

And what about those free air miles? The credit company pays the airline a tiny amount for each airline mile they 'give' you when you charge an item on the credit card. In an NBC TV news interview in January 2007, the president of a major airline said it only costs the airline company about $10 to fly you somewhere after you have charged enough to earn 25,000 air miles to take a flight.

Who do you think really benefits if you spend enough on your credit card to earn a 'free' flight? It should be obvious that the airline mile invitation is masquerading as a huge benefit to you.