It is just impossible to imagine a world without credit cards. From a couple of cups of coffee to go on a vacation in the Bahamas, credit cards are all it takes to make your dreams a reality. But recent developments have caused credit cards to be viewed as nothing but a tool for getting people deeper into the quicksand of financial ruin. So where are credit cards taking their consumers? And what can people do to minimize the negative effects of the current trends in the credit card market?
Standard Interest Rates Continue Rising
An astounding 80% of all credit cards issued nowadays have variable interest rates. This means credit card companies who issued this type of credit card can raise the interest rates paid to them every time the Federal Reserve raises benchmark interest rates. Sadly, interest rates are rising as minimum payments for credit card accounts have also been rising; this is the result of a change in the way minimum required payments are computed, which is now designed to allow borrowers to pay a little of both the principal and the interest.
The hike in both interest rates and minimum payments will certainly put pressure on the financial capabilities of credit card users. What consumers can do, especially the ones with poor credit history, is to diligently look for other credit card offers that have lower interest rates. After all, countless credit card companies are flooding the market and competing for consumers’ attention so there is bound to be an offer out there that undercuts the market.
Suspicious Low Rate Offers Will Continue To Pop Up
As more and more credit companies are fighting for their share of the market, more and more companies will offer low-interest rates, which if taken at face value will be very attractive to consumers. However, as average interest rates dictated by the Federal Reserve continue to reach for the sky, it is impossible for credit card companies to provide low-interest rates for their borrowers without subsequently closing shop. It is only logical that credit card companies will recover the cost of offering low rates in other avenues like requiring borrowers to make more purchases and more service fees or higher charges when transferring balances from other credit cards.
Consumers should always remember to read the credit card contract carefully to avoid being lured into the trap of suspicious low-interest rates. Above all, borrowers should make it a point to never be late for payments when due dates arrive, as a single delay in payment can be viewed as a breach of contract and can be a cause for invalidating the low-interest offer.
Fees Will Continue To Find The True North
Over a period of ten years, the average service charges for purchases made that go beyond the credit limit, overdue payments, and other violations on the credit card contract have gone up almost 100%. It seems credit card companies have realized that they can profit so much just on fees alone. Therefore it is never wrong to assume that credit card companies will continue to raise their penalty fees.
There is no other way for consumers to counteract this except by avoiding late payments and going beyond the credit limit. As a rule of thumb, consumers are advised to limit their credit card usage to half the credit limit to ensure that bills can be paid right on time.