The Descent into Credit Card Debt Hell

THE DESCENT CREDIT CARD DEBT HELL GET A CARD WITH KITTENS ON T 0% APR LOW minimum PAYMENTS So you pay your credit card off every month, but missed an auto loan or electric bill payment. Any late payment on your credit report can trigger a rate increase. It's called Universal Default. 0% APR is great, but if you miss a payment it can revert to a default APR of up to 35%. There is no going back to the 0% after that. Even if you think you made a payment on your due date, the deadline might be in the morning or afternoon, payments made at 2pm on the due date may still be late. The highest fixed late fee charge is currently $39 but percentage based late fees can cost hundreds of dollars per charge, depending on the balance. Variable rates can change without notice, and even fixed rates can change with 15 days notice. Your rates and fees can be changed for any reason at any time. Two cycle billing will ensure your finance charges are much higher if you don't pay your bill in full every month. Out of the country? Be prepared to add a 1%-3% fee to all purchases in addition to a 1% exchange rate fee. Taking out a cash advance? Be prepared for a high APR as well as a percentage fee. Payments made will apply to the lowest APR first. You will have to pay off the entire balance before paying off the high APR cash advance. Low minimum payments may sound like a convienience, but the lower the payment, the longer you will have to pay, finance charges piling up every month. If you transfer a balance to a new card, the limit on the new card may be changed so its actually lower than the balance transfer. This results in a new card that is already maxed out. The first time you use it, you go over your limit and fees are charged. Once your credit starts turning south, you will get offers for cards with starting fees. A card with a $300 limit may come loaded with a Program Fee of $96, a Annual Fee of $48, an Account Set-up Fee of $56, and a Monthly Participation Fee of $8, but charged annualized at $96. All of a sudden your $300 card has $296 already charged on it. If you make a purchase of over $4 you will be hit with a late fee and possible rate change. So you have cut up your cards, great, but be prepared for an inactivity fee. Now you are up to your eyeballs in debt. Your cards are maxed out, the APRS are high, and the only new credit you can get is tiny and expensive. It's time to get scammed with sleazy 'debt relief' or 'credit counseling' services. While there are some reputable companies in the debt relief industry, there are many who will just prey upon your indebted carcass. While these companies certainly can reduce your interest rates and lower your payments, it's not free. Not only will they get a percentage of the collected debt, there may be a counseling fee, an account set up fee, and a monthly service fee of up to $50. This is on top of the interest and finance charges you will still have to pay. Some companies will simply pocket your first payment, meaning you are already a month behind. Think you're safe with a non-profit? Think again, many disreputable companies are re-organizing as non-profit to better qualify for creditor contributions and get to around state licensing requirements. These companies are simply the middle- man and even though you now pay them, your relationship is still with your creditors. Lazy or inept companies will simply not get your payment in on time, prompting more fees. Remember, the only way to qualify for a debt management program is to miss your payments. If you always pay on time, then your creditors have no reason to help you off the treadmill. It's a classic case of damned if you do and damned if you don't. mint.com/blog wallstats.com