Credit Card Issuers Hike Interest Rates in New Year
Sometimes a situation has to get worse before it gets better. Case in point: credit cards.
Sure, new credit card legislation should make some things easier going into the new year. For instance, creditors now have to send our bills 21 days before the due date. They can't punish us for a late payment by hiking our interest rate unless we're more than 60 days past the due date. And even then, a late payment on one card won't affect your rates on other cards - what was known as universal default.
But it seems that for every unfair fee creditors have to give up, a new fee is created. In the future, keep your eye out for annual fees, steeper penalties and higher interest rates - in one case, an APR of nearly 80 percent!
While creditors can no longer arbitrarily hike the interest rate on existing balances, they can change the terms for future cardholders - or for anyone with a variable rate or a payment made more than 60 days after the due date. First Premier Bank is the first to announce an outrageously high interest rate - a 79.9%APR credit card, with a $75 annual fee to boot, according to the Associated Press.
In all fairness, First Premier is subprime credit issuer. For taking on the risk of giving cards to those of us with less than stellar credit ratings, the bank used to charge $250 a year in fees. Since that will no longer be legal, the company increased its interest rate to cover costs. Customers can now expect to pay about $20 in interest on a $300 balance (keep in mind that most Americans owe much more than that).
If 80 percent interest isn't a reason to lay off the credit, I don't know what is. By trying to protect us from creditors, I think legislators are doing us an even bigger favor - they're providing the motivation for us to break free from creditors. With more freedom from unfair rules, it will be easier than ever to regain control of our debts.
When you decrease debt by paying more than the minimum each month, you reduce both your balance and the amount you'll owe in interest. That means you'll be paying less money - and for less time. If your motto has been out of sight, out of mind, this is your wake-up call. It's time to stop making excuses. If you're drowning in debt, it's time to learn to swim before higher interest rates drag you down deeper. Bankruptcy can help.
Bankruptcy can provide legal protection and an affordable payment plan, making it possible to reduce or eliminate even the largest debts. You can learn more about bankruptcy - and whether it's right for you - for free when you sign up for a complimentary one-on-one debt analysis with one of our Atlanta bankruptcy attorneys.