Debt Consolidation the Cure for Credit Debt

May 20, 2010 - PRLog -- As the Credit Card Act took stage across America in Feb 2010 the banks followed with their own performance that will continue playing on uninformed consumers with as much interest as they can charge. As recently reported, the Credit Card Act designed to protect consumers, has enabled banks to create new terms and conditions, fees and rates at their discretion.

The banks newest bright idea bulb is burning cardholders whenever portions of their balances carry different interest rates. Different interest rates are usually found itemized on your statements between purchase, cash advances, and balance transfer transactions. Cash advances usually come with much higher interest fees than regular purchases. Some sources say the interest difference between purchases and cash advances can be as much as 10 percent.

A logical consumer would want to first pay down the balances with the higher interest rates. OBVIOUSLY it makes more sense to pay down the higher APR balances first as they rise at a faster rate. As you can imagine, this logic is bad business for big banks. So to better business for banks, payments need to be applied to balances with the lowest rates first to ensure the higher rated balances continued their costlier climb.

The Credit Card Act specifies that any payments above the minimum must first be applied to the balance with the higher interest rate. ABOVE the minimum…that means you’ll have to make more than the min to even start paying down the higher rate balances for cash advances and balance transfers. That means every month you pay only the minimum none of that payment is being applied to 1 or 2 other balances with higher interest rates and the fees continue to tack onto your outstanding debt totals.

Undermining the recent credit card reforms like a lot of new practices coming into play, it remains legal for big banks to bully consumers out of hard earned income to cover the banks best “interest”. As one usually does when guilty, a larger bank - defended – its actions by stating the policy is clearly illustrated in its cardholder agreement. That’s correct, it’s right there in that 2 font sized tri-fold agreement that came via snail mail sandwiched within a dozen advertisements. So shame on you for not dissecting that tri-fold and strike your finger twice. Wink*

Most consumers do not ever realize that banks apply payments to their disadvantage and have been doing so for some time. Creditors have recently added the reality box to statements that illustrates just how long it will take to get out of debt making minimum monthly payments. The numbers are staggering. $36k over 15 years to pay off a $10k debt doesn’t sound like a good deal to the majority and with good reason. It’s not a good deal at all. The numbers only add up if you’re a banker on the receiving end. 

Credit debt is said to be one of the primary reasons our nation is in such disarray. Banks will continue the cycle to create more profit and the rich get richer while the poor get foreclosed on and fall bankrupt from credit card debt. The system isn’t going to change and no matter what Act is put in place, at the end of day the fact remains that the banks run this country.

With little solutions available a lot of consumers are turning to debt consolidation. This safe haven seems to be one avenue of debt relief for consumers who don’t want to play in the credit game anymore. The realization that game is meant for one winner and one winner only has consumers closing and consolidating their debts for reduced interest rates and an affordable monthly payment that won’t break their budget.

No Act is going to improve this country’s financial health. Behavior modification is necessary for America to evolve and become debt free. A relearning of how to budget money and only spend what you have could be the start to a debt free America.

Work with a BBB accredited nonprofit organization to build a household budget and consolidate your unsecured debts. Nonprofit counseling services can help improve credit while eliminating debt with timely monthly payments. Freedom Debt Management, Inc is BBB accredited and rated A+ for helping America be debt free one household at a time. Call 800.905.1563 and speak to a certified credit counselor to discuss your debt free options and develop a free household budget. Visit our website and complete our contact request form or use our LIVE CHAT feature and speak to a live counselor. You can be debt free, Freedom Debt can help. Call us, Michael Brazier

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Certified credit counselors work with potential clients to assess their current financial situation and determine what their best option may be.