While ever present interest and fees on credit cards weigh on American families, most people would be surprised to learn that there is no national legal limit for APRs (annual percentage rates). In fact, according to the Supreme Court, credit card rates are regulated by individual states so most banks locate their credit card divisions in friendly states such as Delaware and South Dakota with no restrictions on APR rates.
Max APRs and Loan Sharking
In general, anytime an APR is above 20 percent it is considered loan sharking. However some large, well-known banks charge 25 to 35 percent to their customers on top of late fees and other processing deductions. While these rates remain well below the 200 to 300 percent for some pay day cash advance lending, they can still unfairly eat away at your life savings. If you are being charged above 20 percent and pay your bills on time, seriously consider an alternate card.
Paying Off Credit Cards and Good APRs
There is still enough competition in the industry that if you have a job and are paying your bills on time, you should be able to find a credit card issuer that will provide you an APR below 20 percent. With a lower interest rate, you should be able to dramatically reduce the time it takes to pay off your debt. Make sure that you read the fine print as well to avoid unnecessary surprises.
2009 Credt Card Law Protects Consumers
In 2009, President Obama signed the CARD Act which created several new provisions to protect consumers. Some of the important measures include (1) no APR increases in the first year of being issued (2) increased rates only apply to new purchases (3) people under 21 years of age need a co-signer on cards or prove that they have the income to pay the charges (4) Fees capped at 25 percent of credit limit (5) standard dates and times for billing (no Sunday or holiday due dates).
Alternatives for the Seriously Indebted
If you are seriously indebted, for example if you owe over 50 percent of your income in credit card debt, then you should consider some alternatives to paying in full. These include filing for Chapter 7 bankruptcy, or working with a debt consolidation firm to reduce what you owe. While it may hurt your credit rating, it may be the best option to get your financial footing back on track. As a general rule, you should always work to alleviate your highest APR debt first.