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Answered 2013-02-28 01:50:56

A credit card allows you to pay off your bill in installments while a charge card (such as American Express) requires you to pay off your bill in full each month. But it's not a good idea to carry a balance from month to month, even if the credit card company allows you to do so, because of the interest they charge. Every time you don't pay off your bill in full, the overall amount you owe increases. You can end up taking years to pay off your bill, and you'll spend more on interest that you did on the item you purchased.

Here is a good read on what Credit Card companies do for the citizens of the U.S. and Canada. They make big bucks off us!

Check out these anecdotes and important facts regarding consumer credit.

We now have 50-year mortgages. It may be true that no one looking for one plans to pay it over the fifty years; they will sell what they hope is appreciating property or refinance it, but remember how much you ultimately pay for credit is a function of interest rate, monthly payment and the term. You always need to do the math. The longer the term, the more you will pay. Our country now has the worst savings rate since the Great Depression. At a time when more bad things are happening to good people (divorce, job reductions, increased medical costs), savings to avoid financial ruin are more important than ever, but we are saving less. Too many people don't save at all, let alone enough. They hope for the best and plan for the best, so they have nothing to help them weather life's inevitable setbacks. The majority of car loans are now 5 or more years. Deficiencies on "upside down" car loans are one of the major contributors to bankruptcies. See Michelle Singletary's column Spending for Automobiles is Speeding Out of Control. American consumers will pay more than $4.3 billion in withdrawal fees during 2005 for using someone else's ATMs. Making two withdrawals each week from another bank's ATM is throwing away more than $300 per year. A recent automobile dealership ad - " Come in and tell us what car you want, how much you want to pay a month and we will make it happen." They can probably do just that with up to a seven year car loan. Of course the car will be " upside down" (you will owe more than it is worth) long before the seven years are up, and you will probably want to trade it in before the seven years., since it most likely a car you "wanted" not necessarily "needed". Then you can pay it off, which is unlikely, or roll the balance of the old car loan into the new one and be "upside down" immediately. Then if something happens and they repossess the second car,or you turn it in because you can no longer afford it, and the lender sells it at auction, you will be liable for a substantial deficiency. You should buy a car, used or new, that you can afford to pay for in no longer than three years or less. You should stay away from Rent-to-Own, Pawnshop, Payday Loan and Check Cashing establishments. If you work out the interest you are paying, either as interest or fees, it is shocking, sometimes as much as 1800% per annum. You do have alternatives even if you think that you don't. The CARE Program is developing materials for the website, in conjunction with other entities, to address this problem. Bank of America will soon be testing a new program that will allow you to sign up for a credit card at one of their ATM Machines. FINANCE YOUR PET - New pet stores spotted in Central New York offer a special credit card that allows people to make payments on their dog! The store sells pricey puppies at a cost that would restrict many people who would be unable to pay cash to a breeder. Cute puppies of many popular breeds are featured in cold stark cages � and you can rescue them for only $30 per month for the next five years! The credit card application is featured in prominent places throughout the store and the customer is urged to purchase many top-of-the-line accessories to pamper their new best friend. The cost of the puppies is substantially higher than average and the interest will add up over time. (submitted by Megan Dorr)

In the CARE Program we say don't use a card ( credit or debit) for purchases under $20.00, because using cash results in you spending less when you have to make choices about your spending. Using plastic is the very addictive behavior the card issuers want you to engage in. More and more you see people using cards for $1.17 cups of coffee, $1.75 ice-cream cones and other minor purchases. Swipe, swipe, swipe. The card issuers love that sound.

Why would a credit card issuer require only a $15.00 minimum payment on a $3,500.00 balance, when even at just the average interest rate of 15%, the interest on that balance for a month is roughly $44.00? Next month, even if you don't charge anything, your balance will be $3529 along with interest at 15%.

With some credit card issuers, when you go to pay your balance on the internet, for which you are charged a fee, often $15.00, within 48 hours of when your payment is due, there is already a late charge built in. Why? Because they reserve the right to take up to 48 hours to process an internet payment. Does that make sense to you?

Here are some of the things that the Wall Street Journal had to say in a July 23, 2004 Article entitled, As Cash Fades, America Becomes A Plastic Nation:

For the first time, Americans used cards - credit, debit, and others to buy retail goods and services more often than they used cash or check in 2003.

McDonald's and other fast food outlets, the Wisconsin State Police, vending machines, subway systems and charities now accept cards.

When people pay with plastic, they tend to spend more - often more than they have in the bank. Thus, credit cards also have fueled an explosion in consumer debt.

Today, U.S. consumers use plastic to buy $2.2 trillion in goods and services each year - roughly 20% of U.S. gross domestic product.

As cards spread, critics say consumers are running tabs for increasingly routine purchases. "You could end up paying interest on ice cream," says Travis Plunkett of the Consumer Federation of America.

Maria Nemeth, a psychologist in Sacramento, Calif., says card usage is becoming so easy and pervasive that consumers are losing the ability to budget. Using Plastic, she says, is as hard to resist as junk food, and potentially as dangerous. She regularly tells clients to go on 48-hour "crash diets," refraining from the use of plastic for two days at a time.

Card companies say McDonald's found the average transaction jumped from $4.50 to $7 when customers used debit and credit cards instead of cash - in part, because cardholders tend to buy for more people.

When college students are being solicited on and around their college campus to apply for a credit card, and receive a free gift or other incentive designed to appeal to them, they are often told just sign up, take the gift and don't even bother to activate the card. No problem right. Wrong. Recently a young high school teacher at a CARE Presentation told the presenter and the students how this came back to haunt him. At the closing on his first house the day his mortgage commitment was to expire, he was told that the bank would not close on his loan until he closed the many inactive but open credit card accounts that showed up on his credit report. These were accounts that he opened in college, never activated and didn't have records of anymore. He was forced to pay a $1,000 extension fee for his mortgage commitment, something he could ill afford, and to close all those accounts before he could get his home. Were those gifts, probably only worth a few dollars each, worth it?

Many consumers say they have more than one credit card because of the perks or rewards that some cards offer like airline miles, points against the purchase of luxury items such as cars or computers, or even points that can be applied against a mortgage. The list is getting longer and more creative every day. What is critical is that if you are carrying a balance you must consider the interest you are paying and perhaps the fee on that card when evaluating whether it is a good deal for you. It may very well be better for you to learn to live within your means, be consumer debt free and just buy those airline tickets.

A recent MIT Sloan School of Management study showed that in high dollar transactions the willingness to pay can be increased by as much as 100% when customers are instructed to use a credit card rather than cash. More about fees. Americans are big on convenience, but at what price? Is the convenience of paying your credit card bill by phone worth a $10.00 fee ( a stamp is still $.37)? Fees for cash advances, to check your balance, to use an ATM not at or provided by your own bank, and for any number of other conveniences. These fees can add up fast. How about a fee for not carrying a balance on your credit card?

The Georgia State Legislature is considering creating an online lottery where people can buy lottery tickets using credit cards instead of cash only.

Financial Institutions are now considering seven year car loans. At what point during the term of the loan will the car be worth less than the outstanding balance on the loan, so that if the car is totaled in an accident and its fair market value paid by the owner's insurance company, the owner would still have a substantial deficiency to pay. When you consider the interest that will be paid over the life of a seven year loan, how much more will that car have cost?

Many debit cards have automatic overdraft protection. However, overdraft loans usually bear interest at the highest possible credit card rate. It used to be that you had to ask for overdraft protection. Now it comes automatically. Will some college students whose parents think they are acting responsibly by only using the debit card, be using this overdraft protection like a credit card, but at the highest possible rates?

If you call the automated system of some credit card companies to find out your balance so that you can pay it in full, the system will only give you the minimum due. You have to wait for a representative to actually find out your balance. Some online services may not give you your balance, only the amount of credit that is still available to you. Does this seem helpful or fair? Could their messages be more clear? When they first came out everyone referred to them as charge cards, implying that you would charge your purchase and pay for it when the bill came. Now they are referred to as CREDIT cards. The credit card industry refers to those who pay off their account on time and in full every month as "Deadbeats". Isn't that the world upside-down?

This year 35% of the revenue of the credit card industry could be from fees - late fees, over-limit fees, balance transfer fees, annual fees, etc. What could that mean for you?

If you make a purchase that will put you $10 over the credit limit on your card, the credit card company will often approve the purchase and also charge you an over-limit fee of as much as $35. If you have a $20 balance on your account and pay it in full one day late, you could pay a late fee of as much as $35.

If you pay off you account on time and in full every month, you essentially receive an interest free loan of 30 days or more on your purchases. If you carry a balance on your account of even $1, interest accrues on all of your purchases from the moment you make them. So you will pay interest even if you pay the balance off in full the next month.

Often the interest rate on cash advances is higher than for purchases. The interest rate on balances for store charge accounts is often higher than for universal cards like Visa and Master Card, and all stores take them.

Having many credit cards even if they have no outstanding balances, lowers your credit rating because of availability. You could max them out the next day. So why have them? Some credit card accounts now provide that if you are late on any of your obligations, it constitutes a default, and your interest rate can be kicked up to the default rate. Most people think that means late on your accounts with that institution. No it could be another institution, a store charge or even a utility bill. Late pays show up on your credit report.

More and more landlords are allowing rent to be paid by credit card, as are utility companies. That may be great for convenience users, but it can be a disaster for others who don't pay their balances off every month, getting them into big debt fast.

NOTE: If you can't afford it don't buy it! Credit Card companies what people to be in debt and keep them there. Most people make a conscious effort to pay off their balances, but life is risky and it's not always possible. As you can see from the above the Credit Card Companies are sucking the public dry with high rates of interest and even when they offer 0% interest rates, you have to be careful--those rates usually don't last long (say, for onnly six months). Stay clean, use your Credit Card only for purchases that you need (rather than want) and that you can afford. If you're thinking about buying something that you won't be able to pay off all at once--don't do it (unless it's an emergency). Save your money until you have the full amount--then, if you still want to buy it, at least you know you can afford to pay for it.

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