Avoid the Rip-Off Credit Cards
Even in the poor economy currently smothering the UK, most people feel they must have the newest, and best of everything, the newest TV, computer, car. The media drives our lust for newer and better, and that, in turn, drives our feeling of need for credit cards.
It is true that credit cards are important tools to help us with large purchases. Also however, the sad truth is that there are many companies out there who are out to exploit you.
Credit card companies across the UK have allegedly raked in more than £1 billion profit annually by reducing their interest-free periods, and then increasing their annual percentage rates and balance transfer fees.
One website, uSwitch.com, reports that 2009’s credit crunch as well as the ongoing preference of most people to use credit cards rather than personal loans, have together created the right climate for credit card companies to tweak their small print, just enough to rake in a lot more money, but not enough for the casual consumer to even notice.
In case you’re thinking this is not a big problem with most card companies, but the fact is that about 36 percent of cards have raised purchase rates to 17.7 percent APR, from 16.4 percent just last year.
Uswitch says this increase has cost UK consumers about £481 annually. This year, some 30 percent of credit cards cut their average number of interest-free days from 56 to 50 days. This little change gave the companies an extra £3 million each year in payments.
Card companies do this because they know they can get away with it. They realize that many customers will pay their balance back every month, regardless of the interest rate that the company charges them. Now, by reducing the number of zero-percent-interest days, the companies believe they’ll rake in some more money from more financially-savvy users.
On top of all of this, it’s become costlier to transfer a balance also, about 76 percent of the card market is comprised of balance transfer cards, but more than 90 percent of cards charge a fee for doing this, compared to about 29 percent a few years ago. This has led to an unbelievable £412 million in extra revenue for card providers.
The lesson to be learned from all of this is that you must be more selective than ever before committing yourself to any credit card. And be sure to read all of the fine print, and also make sure you understand what it means.
Don’t be so quick to commit to a card simply for all of the flashy deals without understanding that you might be agreeing to some hefty payment amounts in the future, once your free period is expired.
Remember that the credit card provider has their best interests at heart, and only you have your best interests at heart.
