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Chapter 9. FINE PRINT > Diogenes Would Be Proud

Diogenes Would Be Proud

The ancient Greek philosopher Diogenes was said to have spent his time trying to find an honest man. If Diogenes had read the fine print on one particular credit card agreement, he would have had to admit, he had found that person, even if that honesty was not coupled with charity toward one's fellow man. The particular section of the agreement says: “Payment Allocation: We will allocate your payments and credits in a way that is most favorable to us.” Well, at least they are not lying to us.

While you are looking at that fine print, check out the minimum monthly payment requirement. For a long time, credit card companies required cardholders to pay at least five percent of their outstanding balances each month. However, in recent years, many of those credit card companies have quietly lowered that amount to two percent. While at first blush that might seem to be in the consumer's favor, in reality it was done to prolong the credit card holder's debt and increase the overall interest the credit card company receives over time. For example, a person carrying an $8,000 balance at an 18% interest rate will take over 50 years to pay off the debt with 2% minimum monthly payments.


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