Get Started with Debt Consolidation Now...

What are Hidden Debt Loans?

Hidden debt loans are those that are provided for in the fine print of credit card agreements. While credit cards can be wonderful tools, most people do not understand that the terms of the agreement can put them into further debt, through the use of late fees, over limit fees, and increases in interest rates without notification. Because consumers are busy people, they simply do not read the entire credit card agreement before signing and accepting the terms. This can prove costly, unless the consumer is smart about using all of the methods available to avoid this hidden debt loan

Those Late Fees and Late Payment Interest Hikes

Anytime a consumer is late on a credit card payment, the creditor has the right to charge a late fee, normally $35.00, for the late payment. This fee is added to the balance of the credit card debt, and interest is charged on that $35.00 from that point forward. As well, a creditor may increase the interest rate on the entire remaining debt, according to the terms of the agreement with the consumer, if only one payment is late or missed. This interest rate may hike to as high as 24.99%, and it will be charged on the entire balance of the debt, at the rate of 2.08% each month, on the average daily balance.

Additional Rate Hikes Without Warning

Another trick used by credit card companies, in the fine print, is this: If they check your credit report, which they have the legal right to do, and determine that you have added more debt to your financial profile, they can then determine that you have amassed more debt than they wish to see. They will then notify you that no additional credit will be granted, no matter what your previous credit limit is, and that your interest rate will now be increased, because their risk is now increased. It does not matter that you have made all scheduled payments on time, and you have no recourse if this action is indicated in the fine print of the original agreement. To date, a number of consumer organizations have put pressure on Congress to change these practices, but to no avail. Credit card companies are powerful and have powerful lobbyists who are not looking out for the consumer. It appears that Congress is not looking out for the consumer either.

Be Careful about Teaser Interest Rates

Many consumers will find great credit card offers in their mailboxes quite frequently. These offers include low “teaser” interest rates for an introductory period of time. Wise consumers will take advantage of these rates with the additional offer of the ability to transfer other credit card debt to this new account. If you should decide to do this, be certain that there are no extra fees for the balance transfer, and clearly mark on a calendar somewhere when the introductory rate expires. Often, the new rate will be really high, even higher than the previous card you held. Watch for the next offer from a new credit card company and be certain to get your balance transferred in time to avoid the higher interest rates. The other key to this continued practice is to cut up your previous credit cards, so that you do not continue to accrue more debt.