How To Think About Credit Card Offers

by anne on July 7, 2011

credit cards and interest chargesMaybe my credit score has improved or maybe my name has just gotten to a new set of mailing lists, but I recently began getting pre-approved credit card offers again.

I don’t want credit cards and about the only time I’m tempted is when I buy books at Amazon and they offer me a whole bunch off if I’ll take their card, which, incidentally, turns out to be a Chase card, which is just another reason for me to skip it, but that’s another story.

Even though I don’t want a credit card I make it a policy to open each offer just to see what the heck is going on. In this case the offer was from Capital One and apparently I can choose a credit card with a picture of my favorite wild animal – although I could find no indication that the company was making any donations or supporting wild animals in any fashion.

The very first thing I look for is the interest rate they will charge. In this case it was 24.9 percent. Yikes. What happened to usury laws?

Okay, so maybe charging almost a full quarter of what’s charged or borrowed isn’t illegal but the only reason I can think of someone would agree to that is they don’t understand what it means.

Using the credit card calculator at BankRate.com, if I barrow $1,000 on a card that charges 25 percent and make only the minimum payment of not quite $31 a month, it will take me over 10 years (127 months to be exact) to pay off the debt and by that time I will have paid a total of $1,402.38 in interest! That’s right, I’ll pay the original $1,000 back plus just over $1,400 in interest. That’s nuts in my opinion.

Not only that, there are the I’m-not-smart-enough-to-figure-it-out terms like, “This means you may owe more interest charges even if you pay the entire “New Balance” one month, but did not do so the previous month.” They then go on to describe how they figure interest and believe me, it’s not in my favor.

This card isn’t the worst of the worst because they don’t charge an annual fee for the privilege of charging me almost 25 percent interest. And if I paid the full balance every time I used the card on time and it arrived on time I could avoid the interest, but I’d get charged if I paid even one day late.

Okay, I’m not opposed to profit, not by a long shot. But this is outrageous in my opinion and goes on all the time.

Yes, it’s a good thing the laws have changed so the terms are spelled out in type big enough for me to read – a step in the right direction even if I don’t understand them all.

Many religions have made charging interest illegal or called it immoral. More have limited the amount a lender can charge. I’m not sure exactly what would be fair, but a limit of 7 percent or so feels right to me.

You, of course, hold the real answer and that’s to decide if you’re going to use credit cards and if you do do so only understanding all the terms, from interest rate to penalties.

How do you feel about the interest charged on credit cards?

Love, blessings and abundance,

 

 

Image: Attribution Some rights reserved by Andres Rueda

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