How Do Credit Card Companies Get Rich
If you dont know much about credit card companies and the ways that they make money they can seem that you can get a better deal by putting it on credit. Our society has become dependent on credit with their buy now pay later attitude. Because of certain laws that have been passed and regulators that look away credit card companies have been able to make a sweet deal for themselves.
If you want to really find out what the credit card companies can do to make money just read the fine print on your credit card statement and agreement. Ed Mierzwinski who is the consumer program director for a research group in Washington D.C. Its a license to steal.
There are many ways that a credit card company can get your money. One way is to offer one card but give you another. When you receive a statement in the mail they will advertise the best card at the best rates, but your agreement says that if you don't get approved for the premium card the company can send you another card with a much higher APR without your consent.
So just because you wanted that low rate does't mean that the card in your mail box has that low rate. Also they can use what is called universal default penalties. This is where the credit card company checks your credit report for any late payments and even if the late payment is not with them they will raise your rate.
Credit cards can also charge you money if you don't use them. Some people think that it is safe if they keep their card in their wallet or a safe for a rainy day and they are unaware that the credit card companies are charging them $20 for every three months that they have not swiped their card.
One of the better known fees is the over limit and late fees. These can be anywhere from $20 to $40 for the late fees. An over limit fee is when you exceed a credit limit even a penny and they will charge you from $20 to $40.
One of the more evil practices is that a $40 late fee can then give you another $40 over limit fee. If the credit card companies have a mandatory arbitration clause that means that you don't have a right to take them to court, but have to use arbitration. There are also balance transfer fees.
Where they offer a great introductory rate of even 0% APR but require a 3 to 10 percent transfer balance fee, which means if you transfer $5000 at a 10% transfer fee you would be paying them additional $500. Some credit card companies will not even tell you up front what your annual interest rate is going to be.
For instance some credit card companies will just give you a range and then chose for them selves what you will have to pay. This also can be bad for those with good credit history, because they could give you a larger APR to make up for those that have not made any payments.
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