It is no surprise that the pandemic has caused millions of people across the country financial hardship. A recent study conducted by WalletHub showed Americans paid approximately $82.9 billion in credit card debt just last year alone. While the news is good, as it shows that many people are paying down their credit card debt, that does not seem to be the case in South Florida.
According to the Federal Reserve, credit card debt was $108 billion lower at the end of 2020 than it was in 2019. While that may have been the case across the country, it was not in South Florida. The stats for this area of the country are alarming. The average Miami household held approximately $13,701 in credit card debt and lowered their balances by just $16. In Fort Lauderdale, credit card debt in the average household increased by more than $600, and in Pembroke Pines, that number skyrocketed to $930.
This part of the state has some of the highest debt, and many borrowers went into the pandemic without a credit card at all. Now, at a time when many are unemployed and struggling just to keep their homes, they have additional debt on top of it all. Not all credit card debt comes from just borrowing the money initially. A lot of credit card debt comes from the high fees and interest rates credit card companies charge. If you are considering getting a credit card to help offset some of the pandemic’s financial burden, below are four things to watch out for.
Introductory Interest Rates
Credit card companies often offer an introductory interest rate to entice borrowers into choosing their cards over others’ offers. However, too many people do not look past the low rate long enough to realize it is only an introductory offer; that offer could last anywhere from three months to one year. Balance transfer cards that offer a zero percent annual percentage rate (APR) are notorious for this.
Introductory interest rates are good deals, but it is key to know that they do not last forever. Always read the fine print to find the rate that will take effect once the introductory rate period ends. It is sometimes difficult to find this rate, and credit card companies do that intentionally, hoping the initial rate is enough to get you to use their card.
Balance Transfer Fees
Speaking of cards that offer zero percent balance transfers, you should also watch out for any fees associated with the actual transfer. While the credit card company may not charge you interest, they may try to get around this by charging you a fee that offsets their cost. Often, these fees can be as much as three percent of the amount you are transferring, which may be a hefty amount if you are already trying to get out of debt by using the card.
If you do not use the card for any new purchases, and the rates will not adjust before you can pay off the balance of the card, this may not be an issue. You still, however, should pay attention to the fee being charged.
Rate Increases and Late Fees
You may think it is important to pay your monthly payment on time every month to help maintain your credit score with the major bureaus, such as TransUnion. However, it is just as important to make those timely payments every month so you do not incur any late fees. Credit cards do not only charge interest rates, but they may also charge you a late fee that is as much as $40 to $50 in addition to your balance and interest.
Additionally, if you are late making a payment, the credit card company may increase your interest rate. Sometimes, they raise it dramatically and may put it at 30 percent. This will impose an even bigger financial burden on you, and can make it more difficult to obtain loans and credit in the future if you cannot pay it.
Sometimes, an interest rate increase may happen that you have no control over. For example, activity in the lending markets may have an impact on interest rates and the credit card company may increase your interest rate without any warning. Still, it is important to contact your credit card company, inquire about the increase, and ask if there is any way you could get a lower rate.
You may have no other option than to obtain a credit card that comes with a yearly membership fee. It is a fairly common practice, particularly with credit card companies that offer credit to people with little or no credit. Credit cards that offer perks, such as travel rewards, are also most likely to come with a membership fee to help the creditor cover their costs. Annual membership fees can be as much as $100 or more, and might come at a time when you do not expect it, putting you far over your credit limit. Always check to determine if a card you are considering has an annual fee, and whether or not you can afford it.
Our Debt Defense Lawyers in South Florida Can Help with Your Case
Debt from credit card balances, late fees, and high interest can quickly lead to a lawsuit, and debt collection companies will not care what part of your debt they are trying to collect before taking legal action. If a lawsuit has been filed against you, our South Florida debt defense attorneys at Loan Lawyers can help with your case.
Our skilled attorneys know the defenses that work in these lawsuits and will use them to protect you from wage garnishment and other consequences that can result from a lawsuit. Call us today at 954-807-1361 or fill out our online form to schedule a consultation with one of our experienced attorneys and to learn more about how we can help with your case.