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Debt Consolidation Facts

1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.

Credit Cards Can Help Make You Fat

(July 15th, 2007)

You probably think that's a rhetorical statement but it's true, credit and debit cards can help in making you fat. Most Americans know that high calorie fast foods can cause weight gains pretty quickly, infact 30% of Americans are considered obese. What's more, when you hop into the nearest McDonalds and have a bunch of credit cards in your wallet, it's easy to stick out the plastic to purchase those fries and burgers.

Here are some statistics about credit cards and fast foods:

» People using credit cards to buy fast foods spend 30% more than people who pay by cash.

» More fast food outlets are accepting credit cards than ever before.

Several years ago, fast food outlets accepted cash only because credit card transactions took too long to process; this was against the "fast food" concept. Nowadays, allmost all fast food outlets in the US accept credit and debit cards. Since they have these convenient pieces of plastic, they cannot resist the urge to grab something quick. A study conducted by Visa found that:

» 68% of survey respondents said paying by Plastic means is faster than cash.

» 77% said they can buy exactly what they want, because they are not limited by the amount of cash they have on hand.

» $160 billion was spent in fast food restaurants in 2006.

» 80% of these transactions were done in cash.

» Up till March 31st, 2007, the use of credit cards has grown from 20% to 31%.

Use of credit cards is growing because new technologies are enabling customers to NOT have to sign credit card receipts, and they don't even have to hand over their cards to the employees. This helps in eliminating credit card fraud.

Jack in the Box restaurants has implemented a contactless card system in all of its restaurants that allows customers to hold their cards infront of a reader in the counter of the drive-through window. AMEX, Visa and MasterCard have all implemented a similar system. Cason Lane, a Spokeswoman for Jack in the Box quotes, "Instead of giving the credit card to the cashier, the consumer retains control of the credit card the whole time. They just swipe it themselves at the drive-through window. The feedback to that has been quite positive."

A study conducted by Visa examined 100,000 fast food transactions that found that customers on average spent 30% more using credit cards than those who paid with cash. It is likely that if a person had only cash, he would order a small size burger. But if that same person held a credit card, he would order a larger size burger with the addition of a high calorie dessert.

Disadvantages of Using Credit Cards?

i) The group of people at most risk of gaining weight and gaining lots of debt are youths or college students who have an average of 3 credit cards in their wallets. They also owe $890 on average. Since college students live an active lifestyle, they prefer fast food because it is inexpensive and saves lots of cooking time. However, 3 credit cards per each student means they will be making their food purchases on their credit cards, on top of their tution/books/housing costs. This could be financially disastrous. They will eventually pay $10 for every $7 burger they buy, due to interest & fees.

ii) Every time you use your credit card to make a purchase, you are at an increased risk of identity theft fraud. Cashiers could use other skimming devices to steal your credit card data, your identity and rack up debt on your card.

iii) Making food purchases on your credit card can easily eat up your credit line. Catherine Williams, VP of Financial Literacy department at Money Management International quotes, "It eats into your credit line. For those who eat out for lunch every day, spending between $7 and $9 per meal, that's $45 per week and $180 a month. That would at least chip away and should you ever need your full credit line, it could use up some of it."

A precaution to all those buying fast food on their credit cards: never carry over a balance due from one month to the other. Williams quotes, "We know that only one-third of consumers truly pay off in full. Anyone who does not pay in full should avoid using credit cards at fast food restaurants at all costs."