Credit Card Laws What You Need To Know

Credit card laws are the laws that govern the way the credit card companies must operate. You don’t usually hear much about them. That’s because most of them are just basic laws—the type that keep anyone from doing illegal things. But credit card laws are under review and changing as we speak.

Consumers and lawmakers are trying to put credit card laws into affect that will stop the credit card companies from changing their terms at will. You might not realize it, but your credit card rate of interest can be adjusted at any time. You don’t ever have to be late on a payment.

How can they do this? Isn’t there a law preventing it? No, there isn’t. And that’s one of the problems.

If you owe money to Joe and Bob, and you’ve always paid Joe on time but you’re late with Bob’s payment this month, should Joe charge you more? Of course not. And if Joe and Bob were your friends, Joe raising your payment or your interest over a late payment to someone else would probably cause some problems.

But that’s exactly what credit card companies are doing. You can be the best credit card user in the world. You’ve never even made a late payment, and you often pay more than the minimum payment. Make a late mortgage payment or a late payment on another card, though, and see what happens.

Some of the credit card companies stopped this practice after consumers complained. Others hold to it. They can raise your rates and slash your credit line based on that late payment to someone else, calling you a credit risk. In fact, if they review your credit report they can decide to do both those things just based on how much credit you have and how much you’re using.

Credit card laws don’t stop them from raising your rate if they only think you look like you might get into debt trouble eventually. Which is basically a free pass that lets them raise rates and slash credit lines anytime they want. That’s not fair.

They also regularly deal underhandedly with consumers by charging variable rates on the way you use the credit cards. That in itself isn’t dirty dealings. But they way they handle your payments in regard to those rates are.

Say you’re getting a low rate on that balance transfer. Many cards will do that but you’re paying high interest on purchases. You know that, so you’re not bothered. When you make your payment though, where do you think they apply that payment? They lower the amount that you’re already not being charged interest on.

The amount of money sitting there charging you 18% interest doesn’t change. They automatically apply all payments to the amounts with the lowest interest rates to keep you in debt longer and paying more interest.

Many people have no idea that their payments are applied that way. Credit card laws being considered today will also remove the company’s rights to rewrite their contracts with you anytime they want.

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Aren’t credit cards and debit cards the same?

They act the same when you use them with subtle differences behind the scene.

You will find that sometimes a credit card is better than a debit card.

For example, if you desire to rent a car a credit card is a better bet.

Here is why, when a car rental company swipes your card they block out a certain amount say $500. If you use a debit card and you have $600 in the bank you now only have access to $100 because of the hold on your account. The same thing happens when you rent a hotel room or even get gas at the local gas station.

Credit cards also give you better protection if you purchase a defective product or need to dispute with a vendor. The credit card company will investigate a dispute with the company you purchased the product or service. They will put a hold on that money so you don’t have to pay that portion of the bill until it is resolved. You will not have to pay interest on that money while the dispute is ongoing.

Credit card companies sometimes give you an extended warranty on a product you purchase.

Debit cards are good for those every day purchases like groceries, restaurants, routine expenses or any place you would normally write a check. You are spending money that is in your .

Many people get into trouble with credit cards and end up ruining their credit because they fail to realize that they are spending next month’s paycheck to pay the charges accrued on the credit card unless they have the money in savings to pay off the charges. It makes it seem like you have more money to spend until the bill comes due. If you use a credit card it is always good idea to keep the balance low and pay it off every month so you don’t have to pay interest on the use of the money.

It is also a good idea to keep a small credit limit on the card so you are not tempted to spend more than you could pay back. This would lead to a monthly bill that you would have to pay every month.

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Best Way to Get Out of Debt?

How To Get Out Of Debt

In the current recession, how to get out of debt is a question that is affecting more and more people. It is very easy to get into debt when you go through a bad patch financially. You may have lost your job, had a long time off sick or lost a part of your income such as overtime payments. You let the credit cards mount up or take out a loan thinking that things will quickly be back to normal and you can pay everything off.

But often, it does not turn out to be so easy. Maybe you cannot find another job, or your company cuts back on your hours permanently. Even if the situation is resolved and your income goes up again, the debt is usually not so easy to pay off as you expected.

The best way to get out of debt is just to keep making those monthly payments on time. Do not worry that it is going to take you a long time. Just budget for it, do it and think of it as a necessary expense like the mortgage or the rent. That money is not available for spending.

However, if this is not working for you, there are several things you can do.

Debt Consolidation

This is a way of paying out a lot of small loans or credit card debts with one large loan. It can work out cheaper per month, especially if your debts are mainly on high interest store accounts or credit cards. It can also be very good for people who have problems managing money and keeping track of all their debts.

To be successful with debt consolidation, you need to include absolutely everything, and do not run up any more credit card balances after. In fact, it would be best to cut up those credit cards and store cards until the consolidation loan is paid right off.

The danger with debt consolidation is that you may take out the big loan, pay the others off, but then start accumulating more debts while you still have the big loan to pay. This can leave you in a very bad situation. Do not let this happen to you.

Renegotiate Your Loans

Most loans (including credit card debts) can be renegotiated to give you longer to pay. This will mean smaller monthly payments, or possibly a ‘payment holiday’ if you simply cannot make your payment this month.

Negotiating with your bank or credit card company is not as scary as it sounds. Work out a proposal of payments that you could make before you call, then explain your situation truthfully and tell them what you suggest.

Bankruptcy

This is a last resort process where, briefly, you have a court declare that you cannot pay your debts and will not be able to do so in the foreseeable future. You give up all you have and your creditors have to accept whatever they are awarded. Bankruptcy can be voluntary (where you initiate it) or forced (where you have court judgments against you that you simply cannot pay). Always talk to a good Bankruptcy attorney before taking this step.

In terms of how to get out of debt, it is not the best way, but something that some people have to resort to.

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