Overview

Credit card companies use a variety of unfair practices to trap consumers in a cycle of over-priced debt. The companies are allowed by regulators to raise your rates for any reason, including no reason. They are allowed to operate nationally out of states, like Delaware and South Dakota, with weak consumer laws and no limits on interest rates or fees.

Consumers should either pay balances in full, or make the largest payments they can afford, and always pay early in the cycle to avoid late fees. But for years the firms lowered minimum monthly payments and encouraged the use of cards for everyday expenses—through rewards programs—so that many consumers accumulated massive amounts of credit card debt. Until recently, a consumer who owed credit card debt of $5,000 at a common 16 percent APR, who only made the typical 2 percent minimum payment, would take 26 years to pay off the card, even if it was cut up and never used again. Even the federal regulators finally took notice, and recently ordered banks to increase minimum payments by a modest amount.