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Credit card incentives turn out to be major cause of credit debt

Credit cards bring the convenience of purchasing without cash whenever a consumer feels the need to buy something. A simple swipe of a plastic card lets Americans everywhere, including in Tennessee, conveniently purchase whatever they want - from shoes to bags to dinners at fancy restaurants - whenever they want. From those purchases, most credit card companies issue points, bonus, cashback offers and rebates that help the consumer keep using the card - and keep adding to their credit card debt.

In addition, many credit card issuers are introducing cards with even greater rewards for cardholders, who often apply for multiple cards in order to reap these incentives - a practice called "credit card churning." While this practice may benefit some people, unfortunately, it is leaving more and more consumers with so many different credit cards from different issuers - all with mandatory monthly payments - that financial disaster looms every larger.

People who have outstanding debt from cards they have held for longer periods of time are more likely to accumulate additional debt when they sign up for another rewards card. Credit card companies effectively lure a consumer into a trap by offering incentives when a cardholder puts more than a certain amount - say, one thousand dollars - on his or her new card. Every card the consumer signs up for simply adds more debt, hurting the consumer's credit score and overall financial situation. The balances on these cards usually have different interest rates and different late fee charges, which can further add to the consumer's debt.

Fortunately, when someone is financially struggling as a result of such debt, legal options are available. One of these options is to declarinete bankruptcy. A bankruptcy filing, whether through Chapter 7 or Chapter 13, can stop creditor harassment and help the consumer pay off outstanding credit card debt without hurting his or her finances.

Source: Life Hacker, "Is it a Good Idea to Open Multiple Credit Cards for the Rewards," Jason Steele, April 14, 2014

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

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