Wednesday, January 11, 2012

Credit Cards

Don’t you love to see the television ads that pitch all sorts of new credit cards designed to make your life better and a lot more fun?

The latest flurry is the get back 1, 2, 3, 4 or even 5% on purchases you make.

I don’t have access to the financial analysis made to develop these new methods that entice you to obtain these credit cards, but my impression of these new financing methods reveals very creative thinking in order to lead you into a financial situation where you’ll be paying outrageous interest on items you bought that you couldn’t afford and you will never be able to pay for in full.

If you get a 2% discount on an item and you’re not able to pay for the item on your card for at least two months, the card company will get its 2% back after the first month when you have to pay 2% the second month on a balance that may last in perpetuity.

Think about these offers.  Analyze them and see who gets the better of the deal if you can’t pay off the credit card balance of your account the month you buy the item and the month you get your bill.

There are many forms of credit cards tailored to meet your needs and credit scores.  I will attempt to describe these today.

The “zero percent low interest credit cards” are available to those who have excellent credit.  Companies use this low percent to entice you to use their credit cards.   After a period of time (for example, 21 months) the interest rate increases to 11.99% up to 21.99%.  Sounds good until the interest rate starts to rise.  The credit card company hopes you will continue to purchase items far beyond your ability to pay for those items when you get the bill at the end of the month. 

One credit card company provides a $150 bonus when the borrower spends $1000 in the first 90 days.  What a great come on.  After six months the interest rate rises to between 10.99% and 20.99% on the unpaid balances.

“REWARD CREDIT CARDS.”  These cards give the user points to spend on travel miles.  Some cards even give you cash incentives. 

For example the cardholder can earn 50,000 bonus points after spending $3000 in the first three months.  Sounds wonderful but think of how this compels you to spend $3000 you don’t have over the next three months.  There are also yearly fees for the credit cards.  Some card providers waive the fee for the first year but after that you are in for the duration. 

All the cards that have interest rates between 11% and 20% can only be obtained by those who have excellent credit.  Wow, what a deal.  For those who don’t have good credit, the interest rates charged go through the roof.

There is a multitude of other cards designed for you to join programs and spend your money.  But after all the prizes and incentives are gone, the one fact remaining is an interest rate on goods purchased that you couldn’t afford that can be as high as 30%.

1 comment:

  1. Anyone out there remember cash? I can even remember when dimes, quarters, 1/2 dollars and dollars where made out of REAL silver!