Consumer Credit, Debt, and Bankruptcy Blog

Consumer Trap: Deferred Interest on Retail Credit Cards

Deferred interest is a new retail marketing gimmick by almost half of retail credit card issuers, promoted with special marketing terms such as special financing or same as cash if paid in full. It is a 0% or low rate if the balance is paid in full by the end of the promotional period. If the balance is not paid in full by that time, then interest will be charged retroactively on all purchases made during the promotional period. Even a single dollar remaining on the balance after the promotional period ends can lead to significant charges of interest. Considering that many retail credit cards charge a high interest rate — often 25% or more — the addition of deferred interest can add a significant amount to the bill.

By contrast, many promotions of 0% from reputable credit card companies do not charge interest retroactively. Instead, if the balance is not paid in full at the end of the promotional period, then interest only accrues on the balance thenceforth.

Some Notes on Credit Bureaus

Debt Buying Practices

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A new study published by the Federal Trade Commission sheds some light on the debt buying industry:

New FTC restrictions on Debt Settlement Companies

New Restrictions on Debt Settlement Companies:

Note: In almost every case, it is better for debtors to file for bankruptcy under Chapter 7 or Chapter 13 than to use a debt settlement company. Bankruptcy offers many benefits that a debt settlement company cannot provide, including re-establishing your credit sooner. A debt settlement company offers no advantage over bankruptcy, but costs the debtor considerably more money. To learn more, see Bankruptcy — Table Of Contents.

New Rules for Credit Card Issuers

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New rules regulating credit card issuers were approved by the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration. The following rules take effect in July, 2010:

Rules Aim to Protect Credit Card Users

Company Credit Cards can Hurt Authorized Users' Credit Scores if Paid Late

Company Cards Can Hurt Credit - WSJ.com

Many people, as authorized users, have company credit cards to pay for business expenses. Sometimes the people pay the monthly bills themselves, and sometimes, especially for smaller businesses, the company pays the bill. However, an authorized user's credit score can suffer if the card payment is late, even if the company pays the bill.