Credit Cards

Using a credit card is one of the most expensive ways of borrowing money.

Interest rates for credit cards vary widely – they can be as low as 0% interest (usually for limited periods of time) or as high as 30% or more.  Even for the same card and same debt, the interest can change drastically over time.  The Dodd-Frank Act limited the ability of credit card companies (banks) to change your interest rates on the same card and debt.  But, banks quickly found ways around many of the protections in the Dodd-Frank Act, so you still may see your interest rate jump up (for example, if you are late on your payments).

In addition to interest, credit card companies also charge special fees, which add to the cost of borrowing money from them.  Most credit cards charge extra fees if you are late on a monthly payment, if your balance goes over your limit, and if you take out a cash advance.  These charges don’t seem like much, but they add up and significantly drive up the cost of borrowing money from the bank.