A “Hidden” Tax – That’s Right in Your Wallet
Do you know how much interest you’re paying on your credit cards? If your answer is, “um, no” you are not alone. This is exactly what credit card companies are counting on.
LendingTree – a company that runs an online loan marketplace, recently surveyed more than 3,000 Americans to find out how much they knew about the financial relationships they had signed onto with various credit card issuers.
A surprising number of them had little or no idea: 42% did not know the combined total credit limit of their credit cards, and 58% did not know the highest annual percentage rate (APR) of their credit cards.
Many People Don’t Know the APR They Are Paying on Credit Card Balances
Almost 40% (38.06%) of those who did not know the APRs on their credit cards carried balances on their cards from one month to the next.
In other words, there are millions of Americans paying interest charges to credit card companies each month who do not know the actual interest they are paying.
Now, we all know that credit card statements are pretty clear about how much is paid in interest each month, so is this lack of knowledge a form of denial?
Call it a form of denial that is cleverly designed into the credit relationship from the very start. Think of how many credit card offers lure you in with a term of “0% interest.” These offers are so ubiquitous because they work.
The financially savvy among us can use these offers to their advantage, by moving balances from one card to the next to take advantage of the “0% interest” terms.
Credit Card Companies Are Counting on You Being in Denial about Debt
But far too often, the offers become yet another excuse to take on more debt. “After all”, people reckon, “I will surely be able to pay down that debt before the interest kicks in.” When they fail to do so, the credit card issuers make a lot of money.
It’s a business model that works really well, for them.
High interest charges on revolving debt is a form of multi-billion dollar tax that far too many people con themselves into paying each month. Clever financial marketers are very good at pushing our buttons, and profiting from our response.
Get Out from Under These Charges. Go See Your Credit Union
Do yourself a favor and take a good look at your financial statements from the past year or so. Add up how much you have paid in interest charges on your credit cards.
Once you’ve recovered from the shock, go see your local credit union. There you will find options for getting out from under the rip-off interest rates you’re paying to credit card companies.
Your CU contact may recommend that you take on a personal loan to consolidate that debt, and pay it off at a much lower monthly rate. He/she may also help you to build a budget that will keep you from running up credit card debt in the future.
The solutions available now at your credit union could save you hundreds a year, so why wait?
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