Credit Card Disclosures Cause Consumers to Pay Less Toward Debt [Study]

Opening a credit card statement these days often comes with a bit of sticker shock. Banking regulations passed in recent years now require lenders to show consumers how much their credit card balances will generate in interest and fees if only minimum payments are made to pay it off. For example, a healthy monthly payment of $50 going toward a modest $2,500 balance at 9 percent interest will take over 5 years to pay off and add $645 in interest—a whopping 26 percent of the borrowed amount.

Credit card interest rates are now hovering around 29 percent for many U.S. borrowers, who, on average, hold just over $10,000 in credit card debt per household. By any economics definition, one would think that consumers would be rushing to pay double or triple the minimum payment to avoid a mountain of interest and decades of (Read More….)

Are Credit Card Companies Really Charging 83.3% Interest?

Everyone pays attention to the interest rate when shopping around for credit cards, but Finance Charge policies are rarely glanced at. Are credit card companys are really charging you 83.3% interest?   When a customer receives a $1000 loan from a bank, the bank in turn has the legal right to charge interest on the rate you borrowed the loan. If, for example, the interest rate were a fixed 10%, cost of borrowing the original $1000 would be at least $1100, in other words, the $1000 loan + $100 finance charge. Banks and credit card companies don’t expect most customers to borrow the loan and pay it back right away, and nor do most people pay on time every month. The bank allows customers a few days after that date to pay their bill, which is called a grace period. Payments received after the grace period can be assessed as late fees or additional finance charges (Read More….)