If you have ever accidentally missed a payment, then you know that one late payment can cost you dearly with most credit cards. Not only will you have to pay up to $40 as a late payment fee, but any 0% interest benefits and locked-in low interest rate balance transfers could be at risk as well. Here are the top 5 reasons why you should eliminate your credit card bills now.
- Credit card companies can change almost all of the terms and conditions of the credit card by giving you just 15 days notice.
We like to forget, or get used to credit card companies adjusting their lending rates as interest rates fluctuateup and down, but did you know your credit card company can alter any of the terms and conditions for almost any reason. For example, they can increase the late payment fee and they can increase the interest rate just by sending you an updated terms and conditions. If you miss just one payment the low interest rate you are currently being charged can almost double overnight.
- Credit card companies can increase the cost of a purchase months after you bought it.
Let’s say you purchased a fancy new TV 3 months ago, using a credit card which at the time was offering a 0% APR. If you are late with just one payment, the credit card company has the authority to charge you a late payment fee, AND increase the interest rate to the default 29.9% APR. THe best part? There is absolutely nothing you can do about it either since the terms and conditions clearly stated this when you signed up for the card.
In effect, the credit card company can increase the cost of your TV for months after you purchased it. The TV retailer wouldn’t be allowed to do this (they would be sued in a heart beat), but your credit card company can do it with just one missed payment.
- Discount offers are only good if you make your payments on time.
0% balance transfers and introductory offers can be taken away at a moment’s notice. Failure to keep up with all the terms of a credit card will result in your special terms being withdrawn and possibly a huge penalty being applied to your account. If you have interest free purchases or 0% balance transfers, make sure you keep up with the payments no matter what.
- It’s not just your credit card payments you have to keep up either.
If you miss a payment on your mortgage, your car, or even another credit card, your credit card company could analyze your new payment patterns and increase your interest rate since you are a higher risk candidate now.
- Credit card companies are making record profits.
If you don’t pay your credit card bill in full each month, your credit card company makes the majority of their operating profits from you. A substantial portion of their income each year is because of the additional charges they assess for late and non-payments. In fact, a 2016 National Bureau of Economic Research (NBER) study published by Hong Ru and Antoinette Schoar suggests that credit card companies may deliberately target people who are less educated, and, consequently, may lack financial sophistication and make faulty financial decisions.
Without you knowing it, credit card companies can hold you hostage at times when you may really need financial assistance and have to use a credit card. Don’t allow credit card companies to continue making record profits at your expense.
If you can pay the entire balance off within 3 – 6 months do so. Otherwise, consider some form of debt consolidation loan or credit counseling to get your debts eliminated ASAP.