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Step ForwardReining in Harmful Credit Card PracticesBy Karen Harris, Supervising Attorney Medical emergencies, unexpected events, job loss, and other situations can temporarily impact a household’s cash flow. This is particularly true for low-income households. Rather than turning to payday loans or other predatory lending options, the use of credit cards can, occasionally, ease the impact of such temporary disruptions. Specifically, unsecured credit cards can quickly and easily extend lines of credit to those without the collateral assets required for traditional loans. Unfortunately, consumers who have a history of late payments or other credit card debts pay higher interest rates or have other penalties or restrictions placed on them because they are considered “high risk.” For example, “high risk” consumers are often given low introductory rates that quickly balloon within the course of a year. Additionally, a “high risk” consumer’s ability to pay off credit card debt may be exacerbated by the likelihood of unexpected hikes in interest rates or requirements to pay off interest rates before the principle. As a result, the chances of defaulting on such credit card debts are greater.
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