Understanding How Credit Card Companies Try to Get Your Business

In today's economy, Americans are sinking faster and faster into debt. Credit card companies are making a fortune off of interest and finance charges of well-meaning people. Take a look at some of the ways they suck you in.

Credit card debt will help improve your credit rating. Having a line of credit and making your payments on time can help improve your credit rating. Lenders will see you as low-risk if you're making payments as agreed.

Pre-approved cards. Almost every day when you check the mail there's another pre-approved credit application waiting for you. Millions of these are sent each day. This "instant" credit makes it very easy to find yourself swimming in a sea of credit card debt. The more cards you have, the more money credit card companies are making off of you.

The college student trap. If you're a college student, you know that the credit card companies are targeting you in particular. Offers of free T-shirts, hats, and key chains are just waiting if you'll take a few minutes to fill out the applications. There's one problem - most college students have little or no real income!

Credit card companies are counting on students to spend their credit limit on food, books, and other items while paying the minimum payment each month. The less you pay each month, the more money they earn in interest.

Offering credit cards to youth. The younger you start using credit, the more likely you are to get in debt as an adult. Many credit card companies are offering cards to kids. This tactic is designed to teach children early how to get into debt.

Neverending sales. If you have a store credit card, you're likely to fall victim to the mentality that you should buy something just because it's on sale. Stores count on you to spend money at their sales. If you're paying only the minimum payment on your store cards, the store makes more money in interest and finance charges than the discount on any given item.

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About the author:

Michael Torrance is a financial consultant with First American Debt Consolidation and Loans, a company specializing in debt consolidation loan alternatives through consumer credit counseling.