Articles

Beware of getting caught in the credit card traps being created by our financial system.

IF you have the money to pay off the credit card when the statement arrives, using the card is not bad.

However, buying with a credit card when you don't have enough money, is simply committing your future earnings to the credit company under the threat of a bad credit rating. That is economic slavery.

During the past several years, financial experts have helped many people to get out of the credit card trap with debt reduction programs. That alone speaks volumes about how serious the situation is. Helping people do this is not looked on favorably by the credit lenders; after all, they lose all that profitable interest. They create more enticing offers to hook consumers back in with offers like 0% interest for extended periods of time.

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

If you can't pay, what happens then? Carefully read the fine print details on their 'Terms and Conditions' service agreement. Most agreements have a relatively low interest rate in big print; typically it is 9.99% to 12.99%. But, many rates are variable, which really means it is the 'attractive' rate PLUS the 'prime rate.' The prime rate is what the banks are charging the credit company which then gets charged to you. This can add a staggering 6 - 9% in interest on top of that attractive interest rate.

Read further and you'll see the rest of the trap. If you miss a payment or are late, they have the right to jack up the interest rate to as much as 39%. IN ADDITION, they get to add an additional $25 - 39 in fees. If you owe a balance of $1,000, that is $52 - 66 a month in interest and fees you must pay before you ever get to pay the first dollar of the price of the item you bought with the card.

What else do the credit card companies have in their arsenal of weapons to ensure they continue to make interest money from you?

That enticing 'minimum payment' they offer which is mostly interest, and keeps you paying for whatever you bought for about 20 years. In addition, the credit companys are now using invitations to get cash back from stores or earn airline miles for each dollar you spend.

Who pays for that? You do! The stores pay the credit companies for the cash they give you back, and then raise the price you pay.

The credit companys pay the airlines a tiny amount for each airline mile they 'give' you when you charge an item on the credit card. On January 1, 2007 in an NBC TV news interview, the president of a major airline stated it only costs the airline company $10 to fly you somewhere when 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 trap is disguised as a huge benefit to you.

Sandra Simmons, President of Money Management Solutions, has years of experience helping business owners and families manage their income to achieve their financial golas. To learn more about the Money Management Software she created, visit her website and watch the FREE 5-minute demo video at www.MoneyMgmtSolutions.com