Credit Card Companies Ask Consumers to Trade More Debt for Lower Rate

Creditors might soon be giving customers a choice - more interest or more debt?

As you may have noticed, credit card companies are raising rates in retaliation against the new consumer protection laws meant to protect us against unfair fees and term changes (and just in time for the holidays, too - how considerate of them!).

Citibank is taking a novel approach by allowing its customers to forgo some or all of the rate hike by spending a certain amount of money on their credit card each month - up to $750, depending on the state of their credit, according to USA Today. If the program proves successful, other credit card companies could pick it up.

At first glance, it might look like a good deal. Hey, you're spending money anyway, right? So why not put it on your Citi card and avoid paying higher interest? But let's think this through.

Maybe you're not spending quite the amount your creditor requires to avoid the new interest rate. To do so, you need to start putting more purchases on credit - exactly what any personal finance expert will tell you not to do. See, you might be saving some interest today, but by increasing your debt burden, you'll actually owe more interest tomorrow. The more debt you have, the more years - and payments - it will take to pay it all off. While it appears that your credit card company is giving you freedom of choice, they're really locking you in.

Even if you're currently spending enough to qualify, you could save money by lowering your debt burden. Imagine - instead of less interest, you could pay no interest. It's possible by choosing cash over credit and lowering your debt so that you pay less and less until one day, your payments disappear altogether.

Think you owe too much to pay off? Think again. Bankruptcy is one of most effective ways to reduce a large debt burden because it offers a manageable way to make payments while also protecting you from creditor actions like foreclosure.

Interested in learning more about bankruptcy? It's free when you sign up for a free personal debt analysis with one of our Atlanta bankruptcy attorneys. We'll answer your questions and identify a bankruptcy plan that's idea for your family, all at no charge. Adding to your debt is not the way to save money - reducing it is.

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