Aggressive rate increases on credit cards are threatening to push struggling consumers into financial ruin, accelerating home foreclosures and the nation’s descent into recession.
The growing problem is reflected in cases such as that of Dennis Spaulding of Corona, Calif. He bought two last-minute plane tickets for his father’s funeral in 2006, a purchase that increased the amount of credit he was using and made him appear riskier to banks. The result: Banks raised the interest rates on four of his credit cards ”” to 24% and higher ”” doubling his monthly payments to about $2,000.
That led to a financial spiral that has put him on the verge of losing his home and filing for bankruptcy. “I see no light at the end of the tunnel,” says Spaulding, a cabinet designer.
Well, I sympathize with those being victimized by usury lenders, but the [i]only[/i] way to beat credit cards is to make sure you can pay off the entire amount owed with the bill comes in. If you get stuck paying the “minimum amount” you are going to get socked every time basically in perpetuity.
Credit card issuers are now charging interest rates which at one time you had to a member of a certain Sicilian fraternal organization to get. The best way to avoid this problem is to return to basics. Cut the credit cards up and live without them. Believe it or not, it is possible. Credit is just another word for debt. And debt is a four letter word.
Dave Ramsey is right; if you can’t afford it then don’t buy it. I have been living by that rule for about ten years now. I started involuntarily after getting into trouble with credit cards after I lost a job. But I have since come to see that misfortune on at least some levels as a blessing in disguise. With apologies to New Hampshire my financial motto is…
“Live debt free or die.”
Imagine my surprise when, back in September during Hurricanes Ike and Gustave (which both plowed through our town) and after two weeks of no electricity, transportation, or work, my credit card companies Jacked my rates to 28.99% because we were two weeks late getting money to them.
I called them both (Chase and BOA) and told them we were in a legally federally declared disaster area, and they just laughed and told me I hadn’t missed enough payments for them to actually help me?!
So I asked, “How many payments do I actually have to skip before you will help me?” And they couldn’t answer that. Long story short, I’m shopping some long term debt and wondering how they sleep at night.
KTF!…mrb
Credit cards have been a major source of profit for banks and other financial institutions for years now, and it is only getting worse. They have far overstepped the boundaries, and have invited regulation by the government. I look forward to a cap on their outrageous, loan shark ways!