July 31, 2009
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Credit Card Debt Mess, Pt.3
The Effects of Interest Rates.Credit card debt isn't the only thing rising; interest rates have escalated to overwhelming numbers. Some might compare it to a loan shark. One out of every four of the survey respondents reported they were paying more than a 20% credit card interest rate. Interest rates ranged from 0% to a whopping 40% in some cases with an average of 14.8% on the highest debt balance. African Americans are suffering the most from high interest rates; 32% are paying an interest rate that is greater than 20%. A large amount of Hispanic households are also experiencing high credit card interest with 30% of the respondents reported paying a rate of 20% or greater White households had the lowest number, 22% of these respondents are paying an interest rate of 20% or more.
The report indicated that late payments played a role in the cases where consumers experienced an interest rate increase on their credit card. Nearly 50% of the respondents reported being assessed a late fee during the previous year. The overall average for late payments during that time was four. Of that amount, 52% had experienced a credit card interest rate increase. Demos' report indicates that a recent survey of lenders indicated that the average late penalty typically averages between 26.9% and 31.9% of an average of $25.90.
Contrary to what many individuals may believe, these results would reinforce the importance for paying your credit card payments on time. The short of it, paying your payment late could add from 50% or more of the minimum payment due to your account balance. Furthermore, it appears that consistent abuse in paying late could lead to an increase in your account interest rate. So what are Americans using their cards for? Demos asked a number of questions to find the answer. Their report gives some insight. Read part 4 to learn more.