Saturday, February 23rd, 2008 |
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I found an excellent investigative video “Secret History of the Credit Card,” that investigates an industry few Americans really understand. In this one-hour report, various techniques are uncovered that are used by the industry to earn record profits and get consumers to take on more debt.
There are 2 big threats regarding credit cards:
- Credit card companies can change your rate without any restrictions by notifying you only 15 days in advance. This means that they will allow you to gather a decent amount of debt at the introductory 0% rate and then change it to 35% if they want to. By that time you already have so much debt on the card that it is impossible to pay the card off in 15 days. So you are basically forced to pay the higher rate.
- If you are overdue with any other payment (car, house, loan etc) the credit card company will immediately know this and because of “elevated risk” they will raise your rate. Even if you have never been late with any of their payments
A credit card is the only product in America which’s price(the rate) can change after you have bought it
Posted in Credit Cards, Eliminating Debt | 1 Comment »
Sunday, December 9th, 2007 |
Getting out of credit card debt is easy but it’s not simple. There’s tons of different get out of credit card debt websites that are there to help you out with your problem. But most of them fail to take into account the human factor and end up giving bad advice.
The typical get out of debt advisor says that you should always start with paying back the credit card with the highest interest rate.
Don’t do it!
Instead - regardless of the interest rate you should always start paying back the credit card with the smallest amount of debt.
Here is how it works.
While paying off the card with the highest interest rate might seem like a good idea then actually it isn’t! It doesn’t take into account the way our brains work.
There are a lot of stories about people who want to get out of debt and start to pay of their credit cards with highest interest rates but who fail in the end.
The reason a lot of people fail to eliminate their debt is because paying back the loans with highest rates could mean that if one ends up paying back a loan for a large amount it could take years to pay it off completely. This means that unless you have an iron will there is a strong chance that at some point you will break and stop making those hard to do payments.
What happens when we turn it upside down?
If you start from the credit card with the smallest amount of debt (regardless of the interest rate) it means that you are paying back the debt that takes the least amount of time to pay back.
Psychologically this can have a huge impact. Completely eliminating the first debt gives a sense of victory and pride. One sees that it is possible and that she can do it.
Everybody likes doing things they are good in. It is exactly the same with paying off debt – if you know that you can do it then it is more likely that you will. After finishing your first debt you will have a little more confidence that enables you to face your next credit card debt thus giving you a bigger chance of succeeding.
Posted in Credit Cards, Eliminating Debt | 1 Comment »
