One of the ways that consumers trap themselves with credit card debt is by neglecting to read the card member agreement that arrives in the mail shortly after opening a new account. This booklet contains the terms of the cardholder’s agreement with the creditors, and outlines the responsibilities of both client and creditor; explain fees structures, and penalties for late payments.

Sadly, most people don’t read the agreement and are caught unaware when changes are made to their account and late and over-limit fees are assessed. Among penalties are the criteria by which a client’s interest can increase over the introductory rate. Typically, the introductory rate (usually a very low rate 2.9% for example) will last for a short period. The regular rate is imposed at the end of this period. Late payments will also increase the interest rate until an account that was advertised with a 2.9% APR would have an APR of 29.9%. By using the card, the cardholder agrees to the credit grantor’s terms.

The moment that an account’s APR reaches 24%, paying the typical 2% minimum payment merely equals the monthly finance charge. As such the balance remains the same every month, and never goes down. For instance, if a person owes $5000.00 with an APR of 24%, the minimum payment will be $100.00, and the finance charge will also be $100.00. After paying $100.00 to the creditor, the client still owes $5000.00! A person can pay this way indefinitely without making any progress toward being debt free.

Rates higher than 24% actually cause the account holder to owe more after making the minimum payment. To modify the example above, a person who owes $5000.00 but with an APR of 29%, still has a minimum payment of $100.00.

The lone advantage is the there is minimal risk to a person’s credit history/score. This advantage is rendered moot by the fact a person who can only afford to a make the minimum monthly payment is unlikely to be able to afford even more debt. Another common misconception is the credit limit. While it is true that a client may not spend over the credit limit, finance charges and late fees can push the balance over the limit. When that happens, the client is charged a very high fee. In some cases it can be as high a $100.00 per month. The amount is added to the minimum payment for the months when the account is over limit. Most people who are struggling to make the minimum payment cannot afford the extra and their balances skyrocket.

The only possibility that a person with a high APR truly has to pay off a debt without using professional help or counseling programs is to pay far more than the minimum, which can be extremely challenging.