How come credit card companys are allowed to charge us a percentage and a finance charge?
Question by Linda D: How come credit card companys are allowed to charge us a percentage and a finance charge?
Isn’t this considered’double dipping’? Why is this allowed? Who made up the rule they could do this? How can we ever get our card paid off when most of our payment goes towards the finance charges?
Best answer:
Answer by Gary D
It’s called “legalized loan-sharking”. If you only pay the minimums every month, then it will take nearly 30 years to pay off your balance in full.
Know better? Leave your own answer in the comments!
It is not fair. How can you stop them from doing this?
That is their whole business, don’t forget the hidden charges !
That’s the racket of credit cards issuers…
Lure you in with low interest rates, but when you miss a payment, they jack it up.
To pay off a credit card, you have to pay more than the minimum payment. That’s another gimmick the card issuers have… pay a little which is mainly interest payments and you’ll be stuck with that debt for years.
Legally they have charges for loaning you the money, an interest payment… and they have finance charges for administering your account or for missing a payment or some other weaselly excuse.
They are allowed to because they are in the businesses of making money. Creditors reside in certain states because the laws that govern those states are all different, when it comes to regulating fees. There is a saying in this industry ” creditors give their clients just enough financial rope to hang themselves” Actually credit cards were not designed to pay off every month. If everyone paid their debt off monthly the creditor would make no money. Your creditors will be as happy as can be if you continue to pay your minimum payment and not a penny more for the next 20 years!
Kourtnie Donihoo
Debt Analyst
The E.D.A. Group
There isn’t nothing you can do about , you assigned a contract with them.
This may be confusing but the finance charge is the percentage your referring too. To explain this better, your monthly finance charge is based on an Annual Percentage Rate. Divide the APR by 12 and you will determine what your monthly percentage rate is and if you multiply your current balance owed on your card you will be able to pre determine what finance charge you will receive on your next statement.
Example: 12.00% APR = 1.00% a month. If your balance is $ 4,000.00 your finance charge will be $ 40. If you only pay the $ 40 finance charge nothing will be applied to the balance and you will never pay off your card.
Hope that helps.