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Avoid Being Exploited by Credit Card Companies

By: Garry Crystal - Updated: 26 Jun 2012 | comments*Discuss
Credit Card Credit Companies

Credit card companies often used certain methods to exploit their relationship with consumers. Consumers who are hit by these exploitative tactics can soon find themselves with serious debt problems.

Credit Companies and Exploitative Business Practices

A credit card company would not admit that the business methods they use are exploitative. Raising credit limits without notification, hiking up interest rates, and using confusing small print are all just part of the business. In reality, these exploitative business practices are designed to get the most money from the customer. Credit companies make money by lending to customers and charging interest. Using different methods to do this is simply seen by the credit company as the best way to do business.

Exploitative Credit Card Tactics

In the past, credit companies have used various exploitative measures including:

  • Raising credit limits without notifying the customer
  • Raising credit rates without due notice to the customer
  • Using baffling language in the credit contract’s small print
  • Sending unsolicited credit card cheques to customers through the post
  • Using misleading language in advertising promotions
  • Using very low minimum monthly payments to keep the indebted customer repaying over longer terms
  • Charging exorbitant interest rates to consumers who have poor credit records

Reading Credit Card Contract Small Print

The credit contract’s small print can be extremely confusing and it’s designed to be that way. The small print is often overlooked by customers simply because it looks like too much trouble. The terms and conditions are the agreements that must be kept between customers and the credit company. The language used should be clear, concise, and easy to understand. If a credit company does use confusing, misleading or hard to understand language then under law that contract may not be enforceable.

Why Credit Companies Raise Credit Limits

Suddenly finding a credit limited raised by a few thousand pounds can seem like a nice surprise. A nice surprise is how the credit companies want the customer to view the limit rise. Limits are raised for a reason, and that is to benefit the credit company. More credit means more spending on the customer’s part, and hopefully more interest charges for the credit company. It’s an exploitative tactic hidden behind what looks like a generous offer on the part of the credit company.

Raising Credit Interest Rates

Credit companies have been steadily increasing their interest rates. Presently, credit card interest rates stand at their highest level in over a decade. Credit companies claim that these higher interest rates are aimed at the ‘bad risk’ customers. But many good credit card customers have seen their rates rise, and in some cases double. Credit card customers should not tolerate this type of exploitation and should complain to their credit providers if their rates rise.

If providers do not have a good explanation or will not reduce their rates then customers should find an alternative credit provider.

Exploitative Credit Card Companies

They may say they are providing a much needed service but high interest lenders are well aware of their business tactics. High interest lenders unashamedly target consumers who cannot receive credit with normal interest rates. Credit interest rates are exorbitant, and offers of increased limits are designed to keep customers hooked. Any consumer considering this type of borrowing should read the contract small print with a keen eye. Look out for clauses detailing late and missed penalties; high interest lenders are notorious for high penalty charges.

Do You Need Payment Protection Insurance?

Payment protection insurance (PPI) has come in for a lot bad press, specifically through misselling. Many lenders will simply add on PPI without notifying the customer. A recent court case concerned a woman who had paid thousands in PPI payments without requesting the insurance. A judge ruled that the Consumer Credit Act had been breached and ordered the credit company to clear the debtor’s £8000 credit card debt. Consumers should always check the small print and assess whether PPI will actually be needed.

Credit companies are under new government instructions to tighten up their business practices. These regulations are designed to stop credit companies exploiting consumers. But simply because the credit card laws exist to protect customers does not mean exploitation will cease. Credit contract small print should be read thoroughly and consumers should always assert their rights if exploitation does occur.

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