Can Credit Card Debt effect my other Loans?
Until recently, a common practice in the credit card industry was to monitor customer accounts for signs of trouble. When a person went over their credit limit or paid a bill late, they were not only hit with fees on that card, but they were also labelled a “high risk customer” and the interest rates and fees on their other cards started to rise. Recent legislation by Congress made this practice illegal by banning credit card companies from taking a customer’s payment status on other cards into account when assigning an interest rate. That means it never happens anymore, right?
Unfortunately, banks have figured out ways around this rule, making it difficult for people with high levels of credit card debt to find a low interest card and actually get ahead of their debt. To start, there are no laws banning the practice of raising rates and fees on the credit card that a consumer made a mistake with. Those mistakes are now reported to a credit agency more often than they were before the law’s passage.
One of the most common practices is to check the credit report of anyone who is applying for a new credit card. This ensures that people who have made mistakes on their existing cards are unable to find a new card with better payment terms. Since their mistakes are reported to their credit reports, other companies are easily able to learn about their potential customers’ credit past. By not offering lower rates they claim that they are simply protecting themselves against higher risk customers, but in actuality the fact that virtually all banks do this makes it impossible to shop for better credit card deals.
If you find yourself unable to get a better deal on your credit cards, then you might want to consider something other than a balance transfer to get out of credit card debt. A debt consolidation loan would completely pay off your credit cards, giving you better payment terms for your debt. You’ll pay a lower interest rate and have a lower monthly payment.