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Credit Cards – Yet Another Trap

An interesting article by Ellen Roseman appeared today in the The Toronto Star about credit card fees. (As an aside, Ellen Roseman has written many excellent columns over the years, and is the past president of the Credit Counselling Service of Toronto, so she knows what she’s talking about. Her website also has lots of good information).ÂIn today’s article she talks about the usual problems with credit cards, including the high interest they charge. Most bank’s have a prime lending rate of around 6%, but credit card rates are typically around 18%, with department store cards getting up to the 25% range. It’s no wonder that people with high credit card debt often find themselves faced with a decision about whether or not they need to file bankruptcy to deal with their debts.


J. Douglas Hoyes

Bankruptcy Trustee

What was most interesting about today’s article was the new type of fee some of the credit card companies are charging. If you pay your balance in full every month, you don’t pay any interest. However, if you don’t make your payment, the bank starts charging you interest.

In the example given in today’s newspaper article, a man was away on a business trip so he didn’t make his payment on time. When he got back home he paid his balance in full. His payment was made six days after the due date. Obviously because he was late he has to pay interest. Here’s the kicker:

His bank will continue to charge him interest on his new purchases for the next two months, even though his account is up to date. This means that if next month he charges $1,000 on his credit card and pays the balance in full at the end of the month, he will still be charged interest on the $1,000. He will not get his interest free grace period back until two months have gone by with perfect payments.

You can read the article for a list of credit card issuers that are following this new method. You can also go to the Financial Consumer Agency of Canada’s website for a comparison of the different credit cards, and how they charge interest.

The point is that you should be very careful with your credit cards, and make sure you pay your balance in full each month.

If you have more credit card debt than you can handle, give me or any member of the Bankruptcy Toronto team a call 310-PLAN (310-7526, no area code required) or E-mail us to arrange a free initial consultation so that we can help you make a plan to deal with your credit card and other debts.