I get new credit card offers in the mail almost daily, so how do I judge which are good and which are not so good?

Another thought provoking article by Ernie McDaniel - as seen in Forum News.
If you are committed to paying the entire balance on a credit card every month, the differences between one and another may not matter that much. And if you aren't committed to paying off the card every month then the differences between one card and another still may not matter much - because you shouldn't use any credit card at all.

Credit card companies have set a financial trap for the American consumer and easy credit is the bait. Already, the average household carries nearly $9,000 of credit card debt, approaching the grand total of all other types of consumer debt (for example, car loans), and this credit card debt has been steadily growing in recent years. How might this become an evil trap? Let me count the ways.

There are four distinct threats and, sadly, each compounds the others. First, the interest rate charged on a card may increase over the long-term, and some experts believe this increase is likely because of current economic conditions and because we have remained for several years at substantially lower interest rates than the historical average.

Second, while a card will likely have a stated maximum interest rate that can be charged, some also provide that this maximum can be substantially increased if the credit card holder is late on even a single payment - and even when that late payment is on a credit card with another company. That's right, these guys are in cahoots.

Third, credit card companies may reserve the right to increase minimum monthly payments. Such increases have in fact been demanded within the past month by MBNA, Citibank and Bank of America, all of which doubled the required minimum payment from 2 percent of balance to 4 percent. Other companies are expected to follow suit. (From Bankrate.com)

The new and tougher bankruptcy law (and the prior law was probably too loose) may become the fourth odious element of this debt trap, and the element that gives it a steel spring and the meanest teeth. Having lured the unsuspecting and less sophisticated consumer deep into debt, having increased interest charges, having demanded higher and potentially burdensome monthly payments, the “system” now makes it more difficult for him to escape.

So much for the kids' education, so much for personal retirement funding, so much for any other long-term dreams - all of these may go down the drain in trade for shopping sprees and cruises and hot tubs…and years and years and years of interest payments that force virtual indentured servitude. (More mature readers may recall that many years ago talented baritone and comedian Ernie Ford made popular a song about a similar system. It went, “I owe my soul to the company store…”)

Bottom line: Easy credit cards, no matter what the trumpeted differences offered by one card versus another, may be addictive. The solution to this problem? Just say no. True, emotional withdrawal from easy credit and overspending may be difficult, but ultimately not as hard on you or your family or your future as blithely wandering further into the debt trap.

For more information about saving toward long-term financial independence, request the free guidebook Pay Yourself First. Call 318-798-9022; or write to 2001 E. 70-th, Suite 407, Shreveport, LA; or email ernie@mcdanielfinancial.net.
Ernie McDaniel is a Chartered Financial Consultant and President of McDaniel Financial. He can be reached at 318-798-9022 or via email.

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