Credit Card Defaults
Credit card defaults are one of the areas you want to focus on
when applying for a credit card. The defaults are one of the
areas that will increase your balance. Defaults are what send
cardholders into bankruptcy, debt consolidation and so forth. In
1996' alone the soaring rate of bankruptcies reached beyond
3.5%. The credit card 'charge offs' reached above 4.5% in 1996.
As you can see credit cards are problems, none of us need. To
frost the cake, credit card rates are increasing each year, and
the laws are making it difficult for cardholders to get out of
debt. In other words, the laws on bankruptcies are changing,
making it virtually impossible to get out of debt.
Grace Period To avoid defaults and charge offs you will need to
find a credit card with no yearly fees, and offers a lengthy
grace period. The grace period is where it stands, since if the
cardholder goes over the grace period he is subject to high APR.
If the cardholder cannot pay the minimal amount on the card
before the grace period, then he will go into a default where
the holder will repay more for one item than the item cost.
It is wise to save your money to purchase an item you may want,
rather than use a credit card to make the purchase. If you are
searching for a credit card, you should understand the cards
characteristic, compare the cards attributes and cost with other
credit cards. Cardholders should also know their legal rights
before applying for a credit card. When you know your rights,
when the card provider takes advantage of you, you will know
your next step. If you feel your rights are violated, it is
important to file complaints against the allegation immediately.
Waiting will only cost you more headaches that you already have.
The APR on credit cards should also be considered and compared.
Annual Percentage Rates come in numbers, rather than one. Some
cards have APR rates on defaults, cash advance, purchases, and
other areas attributed to the cards agreement. Cash advance
rates can start around 19.99%, which means the cardholder will
pay the balance, plus more than $100 back for borrowing $500.
Balance transfers also have high interest rates. Some cards have
"tiered" APR rates including in the cards payments. If the
cardholder is late on payments then the "penalty" APR kicks in,
and the cardholder may pay back the balance, plus whatever the
APR rate is, which is often high. "Delayed" Annual Percentage
Rates may apply to some credit cards, but be sure to read the
terms & conditions carefully to learn what the rates will be
after the trial have expired.
The APR is applied to the balance due on the card, but if the
card payments reach over the grace period, then the cardholder
will pay the balance, the APR, plus the APR rates for the
delinquency. Fixed rate cards are the better options, since the
APR rarely changes on the card, but if it does, the provider
must immediately contact the cardholder, informing him of the
changes. The Variable rates cards on the other hand, frequently
change, and often combined into other rates. This might include
the "prime" or "Treasury bill rate." Therefore, if you are
searching for a credit card, then the Fixed Rate cards might be
your best bet.
Again, defaults are like bad habits, we do not need them.
Therefore, you want to know all details when applying for a
credit card. If you already have a credit card and do not know
what your card offers, you may want to read the details, and if
necessary apply for another credit card with better rates, and
close your current card account. Make sure you understand grace
periods when applying for a credit card, or even if you already
have a credit card. The grace period is what ignites the flames
of defaults. In other words, if you fail to pay on your card
when the grace period is over, then you are subject to default.
Again, you will pay more for less if you do not choose the
best-rated cards.