Daniel says, “I’ve been buried in credit card debt and it feels like I make payments each month and instead of things going down, things go up. My interest rates recently went up even though I have not missed a payment or paid late. Another one of my MasterCard’s just lowered my limit a lot. Is there any hope. Thanks”
Daniel,
Thank you for contacting me. I’ll do my best to answer your question honestly and openly.
There is nothing about credit cards that operates for your benefit or that you have control over. The banks issue the cards, raise and lower the limits and play with the interest rates as they want.
Banks are self-centered and only care about their risk and reducing their liabilities and so when they shrink credit limits and that leaves you more maxed out on the remaining credit and that hurts your credit report and credit score, quite honestly, they don’t give a shit.
The credit card company is concerned about only one thing, profit. I’m not being cynical here, just dead honest. Profit is what it is all about. Profit is what fuels the bank and the little guy, like you, we’ll you’re just a number on a screen. You are a cog in the wheel to help them generate profit.
The banks know that they can increase profit by increasing interest rates. The balance becomes how much to increase interest rates without chasing customers, profit machines, away. If you’ve got shitty credit, they’ve really got you by the short hairs. You are probably not going to find a better deal elsewhere.
When the economy looks great, banks will pass water out like ecstasy at a rave. When the economy looks bad and losses are creeping up then banks start cutting and pruning to minimize their financial risks, which may hurt their profit.
Past due credit card accounts are rising. They are up 22% since this time last year because people are just getting so close to the financial edge that they are having a tough time paying the bills. And as wages contract people often turn to the credit card as a way to make ends meet. Balances go up and repayment becomes less affordable.
It is reported that consumer credit card debt has doubled since 1996 and is now cruising at around $1 trillion and while even though that number sounds really big, it’s not when compared to what it will be by 2018. The amount of consumer debt hasn’t leveled off, it is still on the climb.
Credit card companies don’t make a profit unless they poor more debt into the economy and more people use it. Banks can’t stop lending. Banks need you to go into debt.
The only real protection that consumers have is the law and right now the law lets banks do pretty much what they want to. Banks are able to change how payments are applied to your account, change the interest rates, fees and grace period, eliminate your rights for an impartial arbitration, and more.
Until the federal government gets the balls to pass laws that actually protect consumers, like through Obama’s Credit Card Bill of Rights, you don’t have much power to change what they are doing unless you pay your balance off in full and no longer carry a debt owed to any credit card company.
When you carry a balance on a credit card you are truly nothing more than a modern day slave, working hard to obey your master, the bank.
Posted under Ask The Get Out of Debt Expert
This post was written by Get Out of Debt on August 29, 2008
