<![CDATA[IslandWide Credit Counselors - Blog]]>Fri, 10 Apr 2020 22:30:34 -0400Weebly<![CDATA[Pre-Approved Credit Cards:  Beware of the Fine Print (and spot the Loan Sharking Fees)]]>Fri, 29 Mar 2019 15:57:56 GMThttps://lifeafterdebtli.com/blog/pre-approved-credit-cards-beware-of-the-fine-print-and-spot-the-loan-sharking-feesYou don't think you have good enough credit to get a credit card and then to your pleasant surprise,  you get this is in the mail:

YOU’RE PRE-APPROVED! GO ONLINE NOW TO GET YOUR CREDIT CARD WITH A $700 CREDIT LINE PRE-APPROVED!
Sounds amazing, right? 
Well, like most things in life, if it’s too good to be true… You know the rest.  Here’s the caveat: with pre-approval “deals”, there’s usually a finer print detailing exorbitant fees that come attached to it. Take a look below to see one such real life example. 

Let’s say you get a letter in the mail from Bank X, for a $700 credit line pre-approved. On the surface, yes this does sound great.  It does have a very high Annual Percentage Rate (APR), in this case a whopping 36% APR.  But,  you learned your lesson and you plan on paying your charges off every month so you should be OK.    or not.....

But Wait!   There's More!

Upon further inspection of the fine print, you inspect the fees: 
  • An annual fee of $79
  • For the first year, a monthly fee of $8 (or $96 for the year)
  • Every year after, a monthly fee of $12 (or $144 for the year)
 Alright, now that’s a lot of numbers. Let’s break it down year by year to see what this means for the hole in your pocket. 

Year 1:
You have a credit line of $700. In case you don’t know already, that means that for this card you are allowed to use $700 before you are cut off. Well not the full $700 since the  $79 is already charged to your account even before you card arrives. That annual fee of $79 equates to 11.2% of what is allotted to you. 

Add onto that an addition $96 for a year of monthly fees, and you get $79 + $ 96 = $175.

So, for a credit line of $700, you are charged  25%  ( 175 / 700 ) JUST ON FEES.

Not to mention, you tack on that horrendous 36% for any balance owed!    

 
It Gets Worse in Year 2:
In year 2 the monthly fee increases to $12 per month or $144 for the year bringing to total annual fees to $223 or 32% of your credit line on just fees. 

To add insult to injury,  there is an automatic line increase to $800 along with another fee of $25 for the privilege of that extra $100 line. 


Rather than fall into the trap of a high pre-approved credit line, focus on building your credit from the ground up with a secured credit card from Open Sky or a low fee credit booster care from Cap One.    Give yourself a reasonable credit line (typically $200-$300 when you’re just starting out) and focus on using no more than 30% while paying it back in full every month. Before you know it, your credit will be outshining those around you, and the initial investment will be much more worth it than that scam letter in the mail. 


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<![CDATA[Get Out of Debt! The Credit Card Minimum Payment Trap.]]>Sun, 03 Mar 2019 12:49:36 GMThttps://lifeafterdebtli.com/blog/get-out-of-debt-the-credit-card-minimum-payment-trapA $5,000 balance at 18.9% with 4% minimum payment of $200 will take 11 years and 5 months to pay off and include a whopping $3,109.16 in interest. Cut $25 a week out of your expenses (or earn this through our referral program) and make a $300 monthly payment and you pay off the same card in 20 months and interest is only $845. hashtag#DebtReductionStrategies .

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