The Truth About Credit Cards

With the holiday shopping season upon us, I think we need to talk about credit cards and the evil that may lurk in the fine print.  It is difficult to checkout at any store lately without the clerk trying to push me to open a credit card. I know their employer instructs them to make these offers and they most likely make a commission on how many accounts they open, but it has become pretty annoying.

What's the Issue?

Many stores, especially around the holidays, will offer a steep discount on your purchase if you open a store credit card account. Then, they suck you in with the future rewards and “benefits” that come with the card. Getting 10, 15, or 20 percent off your purchase sure sounds good, but have you stopped to read the fine print? In today’s electronic world it only takes a few entries and clicks on the register keypad to be all signed up for your shiny new credit card. Believe me, when you sign your name, you are stating that you have read the “terms and conditions.” But how many of us stop to do that when we are standing in the checkout line with a swarm of other shoppers behind us?

Interest Rates

First of all, let’s talk about interest rates. I checked with a few local banks and credit unions, and they generally offer interest rates of 8.00% APR (annual percentage rate) to 12.50% APR or up to 18.00% APR depending upon your credit rating. Most store cards do not care about your credit rating and simply have set interest rates. Many of these cards are owned and serviced by large national financial institutions. According to www.creditcards.com, most store card interest rates average about 25% APR, and one national retailer is now going over 30 percent! So, here is the problem. With interest rates like these, if you don’t payoff that purchase you saved 10, 15 or 20 percent on when you opened the card in the first month before interest kicks in you actually lose that discount! If you make minimum monthly payments, you may end up paying for that awesome leather jacket or cool new pair of boots for years to come!

What You Can Do to Avoid the Trap

Your best bet when in these situations is to stand strong against a pushy salesclerk and refuse the offer to open the store card. If you don’t, before you know it, you will have a wallet full of cards and a potential mountain of debt. Don’t take the card just for a discount. Odds are if you are already at the checkout line with your items you already have the means to pay for them without taking on a new credit card. It is never advisable to make purchases you really can’t afford just because the credit card perk is “an offer you can’t refuse.”

However, I know that it is easy to accept that deep discount for a few clicks on the register key pad. I have fallen for it myself. It is especially easy when you want to provide meaningful gifts to family and friends during the holidays.

If you have gotten involved with too much credit card debt, even if you can afford the minimum payments, take a look at how long it will take you to actually pay all the debt and interest off. In many situations, you can recover your credit rating faster and less stressful by pursuing a bankruptcy option under either chapter 7 or chapter 13. If you would like to discuss your options for dealing with you debts, contact our office nearest you and schedule an appointment for a free confidential consultation with one of our attorneys.