No Frills Credit Card Trap
All credit cards used recklessly can cause debt headaches. However, it appears to be no frills cards that are currently in the spotlight.
A leading Australian researcher from Cannex retail information says:
“It only takes a few slips to turn a low-rate credit card into a penalty fee devouring monster
Most of us get caught with credit card penalties on the odd occasion but consumers who regularly incur penalty fees due to household budget pressures are building their debt,” Cannex analyst Harry Senlitonga says.
“Consumers think they are doing the responsible thing by getting a no-frills card but it can defeat the purpose entirely if the account is not managed correctly.”
Evidence suggests that an interest rate of under 10 per cent rises to about 22 per cent over a year if two late payment penalties of $25 each and two over the limit penalties of $35 each are incurred. That can really add up.
Help might be at hand with international movement on this issue.
For instance British banks are having to reduce penalty charges on credit cards, and in some cases provide refunds in light of recent legal challenges.
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