Do You Understand Your Credit Card Terms?

Posted on 23. Oct, 2006 by in Saving & Investing

GAO_seal.gifA recent report from the Government Accountability Office (GAO) last week seems to suggest that Uncle Sam is taking a closer look at tactics of credit card companies. According to the report, popular credit cards once having fixed 20% interest rates, now feature a variety of interest rates and other fees, including penalties for making late payments that have increased to as high as $39 per occurrence and interest rates of over 30 percent for cardholders who pay late or exceed a credit limit.

Not only late fees and interest rates the highest they have ever been, but nobody seems to be able to understand the terms and conditions which trigger those late fees and rate hikes. The GAO’s interviews with 112 cardholders indicated that “many failed to understand key aspects of their cards, including when they would be charged for late payments or what actions could cause issuers to raise rates. These weaknesses may arise from issuers drafting disclosures to avoid lawsuits, and from federal regulations that highlight less relevant information and are not well suited for presenting the complex rates or terms that cards currently feature.”

The one shining star in this otherwise gloomy report was that although interest rates as a whole have risen, many people are paying lower interest rates than they have in the past. According to the report, “many cardholders now appear to have cards with lower interest rates than those offered in the past; data from the top six issuers reported to GAO indicate that, in 2005, about 80 percent of their accounts were assessed interest rates of less than 20 percent, with over 40 percent having rates below 15 percent.”

It looks as though Uncle Sam is going to have to encourage credit card companies to ease of the leagalese and write credit card terms in languge we can all understand. Although in my opinion, the government should be doing more to educate the public (especially the low-income bracket) on the dangers of credit cards. Sure, most of us seem to be paying lower interest rates, but the low-income bracket is paying the highest it ever has – for reasons they don’t even understand! With the skyrocketing amount of personal debt we as a nation seem to be taking on, low-income families should be the last people who should be applying for, and approved for, credit cards.

3 Responses to “Do You Understand Your Credit Card Terms?”

  1. John Malish

    30. Oct, 2006

    And there are still other variants how to begin and adjust the budget?

  2. Sherri

    30. Oct, 2006

    ….”With the skyrocketing amount of personal debt we as a nation seem to be taking on, low-income families should be the last people who should be applying for, and approved for, credit cards.”

    Yeah.. you know.. because low-income families are dumb and have no sense of responsibility.” God forbid they manage to get a credit card!

  3. Jason

    30. Oct, 2006

    Not dumb, but those in the lower-income bracket are more desperate to climb out of that low-income status. And the easiest way to do that is to use the dozens of credit card offers that come in the mail each week. I’m not saying that the rich are any better at keeping debt under control, but at least they have a fighting chance to get out of it with a simple decrease in personal spending. Those in the low-income bracket can’t cut back on spending anymore or else they’ll have to stop eating!

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