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Facing the Rising Tide of Credit Card Interest Rates

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In the midst of millions riding the waves of the real estate reckoning, even more ordinary Americans are facing the rising tide of credit card APRs. In fact, according to new data, the average credit card interest rate has recently climbed to an all-time high, with averages hovering just below 15%. These skyrocketing rates can be a serious burden for those carrying balances; forcing many to think twice before paying with plastic, and many others to lament last year’s holiday purchases.

The reason for these higher rates may initially seem surprising: better money management and credit card reforms. Recent increases in both the number and amounts of credit card fees, as well as the escalation of interest rates are a response to the fact that the overall amount of credit card debt that Americans are carrying has diminished in the wake of the recent recessionary spending practices. As such, a commitment to paying down balances and using less credit has caused banks to [over]compensate by raising interest rates.

In addition, many issuers raised APRs in advance of the implementation of the CARD Act of 2010. Because the new legislation prohibited issuers from raising your rates for no reason, with little wiggle room to make sudden increases (except in instances of several late payments or other penalties), banks instead started customers out with higher rates. Nonetheless, banks are still seeking new customers, and, as a result, have also begun offering low promotional rates for balance transfer opportunities. And while this is good news for card surfers who are adept at managing their money with balance transfers to cards with better interest, in the alternative, it’s still bad news for a bevy of buyers who tend to bite off more than they can chew with credit cards.

According to a recent report by WalletPop, it’s clear that the CARD Act should have done more. “While some legislators have proposed caps on the rates credit card companies can charge customers, the fact that no such restriction made it into the original CARD Act makes it unlikely that one will be implemented now.” As Ed Mierzwinski, consumer program director at consumer advocacy organization U.S. PIRG said, “the best solution is to keep chipping away at our collective debt. After all, if you don't revolve a balance, your APR shouldn't really matter. He adds that a big motivation for people seems to be the new CARD Act-mandated disclosure that spells out exactly how long you'll be stuck paying off your balance -- and how much of that will be interest -- if you only make minimum payments each month. If you revolved a balance and have never taken a look at that information on your statement, check it out; it could be eye-opening.”

Without more protections from credit card interest rates, will you be drowning in debt this year? Are you worried about the state of your credit over the next 365 days and beyond? Trying to figure out how to reduce your debt—credit, debit or otherwise—and get back on track in a New Year? Knowing a qualified bankruptcy attorney can also help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future beyond all of the things “in store” in 2011.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-888-234-4181, or make an appointment online at www.billsbills.com.

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