What the Credit Card Companies Know That Keeps Them in Business

Just look at it, tucked away ever so neatly in the folds of your wallet. That little 3 3/8 X 2 1/8 inch glossy credit card looks oh so innocent as it shimmers and gleams in the light, waiting for its next day of action!

But the credit card company who issued you this seemingly harmless card are far from naïve. In fact, they know exactly what they are doing.

It’s no coincidence that according to the Federal Reserve’s latest survey 46.2% of American families are holding credit card debt[1] and are now in search of debt relief. Credit card companies have made a multi-billion dollar industry out of knowing how consumers think and by predicting the average consumer’s habits. Here are a few things that banks know that credit card consumers are sometimes in the dark about:

- Possibilities for Problems in the Economy. Many credit card companies have entire teams dedicated to researching the economy and predicting possible economic issues that would cause consumers to use their credit cards more frequently. It is no coincidence that at a time when many people believe that the American economy has hit a recession due to increases in the price of oil, food, and other everyday necessities, the credit card industry is banking more and more interest due to an increase in the daily use of credit cards.

- 0% APR Offers Lure You to Spend More, Thus Owe More. A few years back, credit card companies began sending out numerous 0% APR offers to convince credit card holders at other banks to transfer their balances. While many people took advantage of these 0% offers to save money and pay off debt, they may not have taken into account the fact that by helping to free up money on their credit card accounts, these credit card companies were actually creating somewhat of a trap. If a consumer who is trying to pay off credit cards decides to use the new 0% APR credit card after a certain period of time (even if the 0% balance transfer APR is in effect for the life of the debt), the interest rate on that new purchase balance can shoot up to 18% or more, and is paid off last. That means that 10, 15, or 30 years down the line when the 0% balance is finally paid off, the amount you purchased on the card at 18% has been accruing in interest for all of that time as well. You may find yourself in the same boat as before!

- “Rewarding” You With a Higher Credit Limit Keeps You Hooked. Credit card companies frequently “reward” good customers who pay their bill in full faithfully every month by increasing their credit card limits. But in actuality, they know that as long as your limit continues to rise, you are likely to use the card even more. At some point in that pattern of behavior, you will reach a peak where the credit card company will no longer raise the limit and is profiting from the higher finance charges on your credit card bills. It’s all about predicting the consumer’s behavior.

- Your Past History Predicts the Future. Another bit of invaluable knowledge that credit card companies benefit from is your full credit card history. They have a detailed history of your past purchasing habits, balances, and what you have done in certain situations that have arisen in your financial history. What you have done in the past is a good predictor of your future actions. For example, maybe you started a business and used your credit card to purchase $1,000 in business equipment one month. Now your creditor knows that you are more likely to use your card for both personal and business purposes. In another example, if a creditor sees that you have a penchant for expensive designer clothing, they will not only assume that you will purchase more in the future, but also send you special offers in the mail for designer clothing from its advertising partners.

- Consumers Don’t Always Read the Fine Print. Creditors also bet on the belief that most credit card consumers are too lazy to read the fine print of their credit card bills and agreements. If a credit card customer continues to pay the minimum payment, not knowing what the APR is, and not knowing how payments are applied, they can become trapped in a long cycle where they will pay off credit cards for an extended period of time. Meanwhile, the creditor will continue to reap the benefits of the consumer’s lack of knowledge for a long time to come.

Life Happens

The number one thing that credit card companies know way in advance that we consumers don’t always realize is that life happens. Unexpected bills arise, cars need to get fixed, and medical and dental procedures have to be performed. In many of these situations, consumers have found themselves so deep in financial distress that their automatic answer to unforeseen costs is to start swiping. And so continues the saga of American consumers who are trapped by excessive credit card bills and savvy credit card companies that make money off of the desperation and unawareness of consumers.

If you have found yourself in a situation where you have fallen victim to some of these traps and have accumulated a significant amount debt due to life happening, it’s important that you know there is hope, and yes there is a solution to your debt problem. Debt relief programs like the one you’ll find at NetDebt.com have helped thousands of consumers break out of their “debt trances.”

If you are ready to live debt-free, apply for an online debt consolidation plan at NetDebt.com . The debt relief specialists at NetDebt.com will provide you with effective debt solutions that can be implemented immediately.

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Debt Settlement is very similar to the Federal Debt Bailout bill on a smaller scale. The US government is removing the “toxic” debt that is on the books of the major banks. Debt Settlement removes your “toxic” personal debt so you can start new and improve your cash flow situation.

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Regaining Authority Over Your Good Name
Millions of Americans are struggling with expensive liabilities. Bad credit happens when average men and women fall behind on their credit card bills and other debt payments because of unemployment, lack of employment, or the unavoidable challenges of life.  If you have gotten yourself in this state of affairs, it is a good idea to take command of the situation rather than letting your bad credit to get worse. In this article you’ll learn the most to the point method of regaining control over your bad credit and on the road to zero debt.

1.    Get Your Equifax, Experian and/or Transunion Report. Some balance carriers are merely a few billing cycles behind on their credit card bills due to financial hardships, and they may have forgotten about several unpaid bills that are bringing their FICO Score south. A few of us have gotten ourselves so far back in credit card bill payments that we have lost track of what is due! The initial required action for getting back on the path to good credit is to obtain your credit report so that you can see

1) the creditors you are indebted to,

2) the amount you need to pay them, and

3) the total of your monthly payment. You are entitled to one free credit history from all 3 of the key reporting institutions each year. Once you are aware of your debt figures, you’re in an improved position to make a smart resolution regarding your debt affairs.

2.    Reopen the Lines of Communication With Your Card Issuers. This might be difficult for you. At some time you’re going to have to reopen a connection with your creditors if you have lost contact with them after not making payments. In the worst case scenario you will have to withstand a long quizzing with a sprinkling of unfriendliness. The great news is that there’s a chance that you will be offered an agreement to pay off debt that can put your bill back to current and probably get rid of some of those flaws on your credit.

3.    Quit Making Charges to Open Accounts. Probably the most important resolution you have to make in order to re-establish power over your credit and debt situation is to cease utilizing your credit accounts. This means you have to cut up those credit cards and begin living on a cash only basis. Adopt this way of thinking: if you do not have the greenbacks to pay for a buy, then you cannot afford it.

4.    Be Sure That Your Income is Sufficient To Pay Your Debts. The hardest step to eliminating your debt issues is taking home the salary that is required to cover your payments and get current with your debts. That’s because your take home pay is often not in your control. Consider finding a 15 hour per week side job and dedicate all of the earnings from that to your debt balances.

5.    Learn About Debt Solution Plans.  If you’re trying to pull down your regular payments, pay off debt more quickly, or if you just desire to steer clear of open phone calls with your creditors, you might want to learn about an online debt Consolidation plan. These helpful programs are put into action by debt settlement companies that focus on debt reduction and debt negotiation with your card issuers.

If you’re serious about getting control over your credit and learning how to pay off debt quicker, dial the online debt consolidation lawyers at NetDebt (877) 998-DEBT or get started on the road to debt relief by dropping in on Net Debt‘s online questionnaire at www.netdebt.com

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The Federal Trade Commission staff will hold a workshop on September 25, 2008, to explore the growth of the for-profit debt settlement industry and to analyze how this model is affecting consumers and businesses. The event is free and open to the public; pre-registration is not required.

WHEN: September 25, 2008, 8:30 a.m. to 5 p.m.
WHERE: FTC’s Satellite Building Conference Center, 601 New Jersey Avenue, N.W., Washington, DC. A valid photo identification is required. A live webcast will be available at www.ftc.gov.
AGENDA: Topics will include regulation and legal developments, advertising and marketing of debt relief services, role of third-party lead generators and other service providers, the history and development of the industry, and consumer education.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:
Office of Public Affairs
202-326-2180

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You may listened to financial experts on cable and talk shows talk about “ good debt ” and how it contrasts with bad debt. You’re advised to pay off all bad debts primarily due to the fact that they commonly are tied to high interest rates and are not balanced by property. It is good to first get the distinction between good and bad debt when you are setting up a debt reduction plan.

Information About Good Debt
-    Distinguishing Good Debt. A good debt is any debt that will effectively raise your assets. The rule follow is: if holding the debt might create an increase in your assets, then it’s called a good debt. Good debt can produce a profit for you through a rise in value or business transactions. Arguably, a good debt could additionally be a debt that causes a rise in your general quality of life. Additionally, a debt that can be partially deducted on your taxes, which means that having it decreases your tax owed each year, should without question be considered a good debt.

-    Which Accounts are Good Debts The best  example of a good debt would be a home debt. Assuming that it’s attached to a house or portion of terrain that is going up in value, a mortgage debt results in an income from the equity that is formed in the property. Another example of good debt would be a student loan, because it’s made for knowledge gained and can produce future wages. A new business debt could additionally be called a good debt if the business breaks a profit and results in a regular residual salary.

What Makes Bad Debt So Bad?
-    What’s the Easiest Way to Determine That One is Carrying Bad Debt? To be clear, if the debt doesn’t produce additional worth for you and/or your bank account, then it should be done away with. A car debt is a bad loan because automobiles drop in worth. The rule  of thumb is that as soon as you take a fresh vehicle off of the lot you leave behind 20 % in worth, and that decrease in worth continues all the way up until the car is paid up. The most widespread demonstration of bad debt is your credit card bills. Credit card debt is the most dangerous type of bad debt for three major reasons:

1) it’s not tied to items of worth (save you consider the jeans you bought in 1997 an item of worth!),

2) it commonly comes with an expensive rate, and 3) it’s a rotating debt that could continue all the way through your existence.

I Need To Figure Out How to Eradicate Bad Debt
You have many choices if you are seeking a debt solution. A segment of debtors look to bankruptcy, which may get rid of your debt but cause you to be rejected by potential credit card companies, employment agencies, and other companies for up to ten years. Some debtors settle on their own debt reduction programs, and many have discovered the advantages of plans proposed by debt settlement companies. Whatever method you decide on, credit card debt should in every case be the first on your list because it it high in cost and actually robs value from your bottomline.

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Credit Card Companies  Benefit From Your Bad Habits

Oh look at that card, tucked away harmlessly in the folds of your purse. That little three and three eighths by two and one eighths inch glossy credit card looks oh so guiltless as it beams and sparkles in the sunlight, awaiting an upcoming day of action!

However the credit card company who assigned you this outwardly innocent card are not clueless. Actually, they know just what’s going on.

It’s not by chance that according to the Federal Reserve’s latest survey nearly half of American families are holding credit card debt  and are now looking for debt relief. Credit Issuers have developed  a multi-billion dollar industry from guessing the average credit card user’s behaviors. Below are some things that banks know that card holders are sometimes unaware of:

-    0% Balance Transfer Offers Convince You to Charge More, Therefore Owe More. Several years back, credit issuers were mailing out varied 0% APR deals to convince customers at other companies to transport their money. While many customers took advantage of these low APR deals to save cash and pay off debt, they might not have thought about the fact that by allowing customers to free up money on their credit accounts, these credit issuers were really creating somewhat of a trap. If a consumer who is seeking to pay off debt ends up using the new 0% APR card account after awhile (even if the 0% balance transfer rate is in force for the duration of the debt), the APR on that new purchase balance can shoot up to 18% or more, and is paid off after the low rate balance transfer. That means that 12, 22, or 32 years into the future when the 0% balance is eventually at 0, the total you added to the card at 18% has been accruing in interest for all of those months as well. You could realize that you’ve put yourself in the same boat as before!

-    ”Thanking” You With an Increased Credit Threshold Keeps You Hooked. Credit card companies commonly “reward” excellent debt holders who pay their monthly debt in full loyally every month by raising their account thresholds. But in actuality, they realize that when your limit continues to rise, you are likely to swipe the card even more. At some point in that process, you will get to a height where the credit card company will stop raising the credit threshold and is benefiting from the higher finance expenses on your monthly bill. It’s all about predicting the consumer’s activities.

-    Possibilities for Economic Downturns. Many card issuers have complete departments dedicated to researching the economy and forecasting possible economic complications that would cause consumers to use their credit accounts more recurrently. It’s not by chance that at a point in history when many experts believe that the American economy is experiencing a recession because of increases in the price of food, oil, and other everyday necessities, the credit card industry is racking up more earnings because of an increase in the everyday use of credit cards.

-    Card Users Don’t Usually Scan the Small Print. Creditors also bet on the belief that many credit card users are too busy to look over the fine print of their credit card arrangements and agreements. If a credit user keeps paying the lowest payment possible, not realizing what the APR is, and not knowing how payments are distributed, they can discover too late that they are stuck in an extended cycle where they will pay off debt for an ongoing period of their lifetimes. All the while, the credit card company will keep on reaping the benefits of the consumer’s deficiency of information for a long time to come.

-    Your Usage History Determines Your Forthcoming Actions. Another bit of valuable knowledge that card issuers profit from is your full credit usage. They have a complete file of your past buying habits, balances, and what you have decided on in certain predicaments that have occurred in your buying history. Your behavior in previous situations is a useful forecaster of your future deeds. Case in point, maybe you initiated a new trade and used your credit card to buy $1K in production related gear one day. Now your bank knows that you are probably going to use your available balance for both private and commercial purposes. In another circumstance, if a creditor notices that you have a desire for expensive brand name jeans, they won’t only guess that you’ll buy further expensive items in the coming months, but furthermore forward you special deals with your bill for brand name clothes from its advertiser associates.

When Life Throws You a Curve Ball…

The number one thing that banks realize way before it occurs that we regular folk don’t predict is that sometimes life throws curveballs. Unexpected costs come up, vehicles need to get fixed, and medical and tooth procedures have to be carried out. In many of these situations, people have gotten themselves so knee-deep in financial problems that their immediate response to unforeseen costs is to start using credit cards.  And so continues the saga of US customers who are stuck with expensive unsecured debt and smart creditors that make money off of the desperation and financial ignorance of consumers.

If you have put yourself in a state of affairs where you have been victimized by all of these attempts to lock you into credit card debt for life and have built up a substantial amount of bills due to life happening, it’s dire that you realize that there is hope, and you can feel assured that there is an answer to your debt concerns. Debt Solutions like the one you’ll discover at NetDebt have helped thousands of consumers break out of their debt trances.

If you are ready to become free from debt, find out more about the debt settlement programs at NetDebt. The debt solution experts with NetDebt will give you real debt help that can be implemented immediately.

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Alan Barnes IAPDA Certified Debt Arbitrator and Certified Debt Specialist
President and CEO of Debt Regret
http://www.debtregret.com

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