That may seem like a strong statement but it make sense when you know all the facts. Credit is not a bad thing but the goal of credit companies is to keep you forever in debt.

Even if you make your credit card payments on time, the

credit card bank can raise your interest rate automatically if

you're late on payments elsewhere -- such as on another

credit card or on a phone, car, or house payment -- or simply

because the bank feels you have taken on too much debt.

This practice is called the "universal default" clause and

increasingly is becoming a standard clause in credit card

agreements. According to credit card executives, the logic

behind universal default is that the bank is not being

unreasonable in raising rates when it has reason to believe

that the risk of being repaid by the customer has increased.

[Note: Credit card banks can now easily track your everyday

financial activities and monitor your credit score --

Your credit score -- known as a FICO score -- has become a

vital statistic for many Americans and can be widely shared.

It is used to determine how much you can borrow, how much

you pay for life insurance, if you can rent a home, and, as

already noted, it can be a factor in determining the interest

rate you pay on a credit card.

Most Americans don't know what their credit score is, nor how

it's computed and with whom it's shared. Your credit score is

usually determined by five factors, with the most important

being the amount you currently owe and your payment history

on large debts.

There is no limit on the amount a credit card company can

charge a cardholder for being even an hour late with a

payment.

In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted

the existing restrictions on late penalty fees. Back then, fees

ran to $5 or $10, and usually did not exceed $15. After the

Court's decision, fees soared, reaching upwards of $30.

Since then, the amount of revenue the companies generate

from fees (including late charges, over-the-limit fees, and

charges for returned checks) has doubled. Duncan

MacDonald, one of the lawyers who worked on the Smiley

case, predicts penalty fees could rise to $50 in another year.

It's important to read the fine print on your credit card agreement.

Not many people do, however. Even credit card executives and consumer advocates admitted to FRONTLINE that the last time they read their own contracts was years ago and the credit card agreement is difficult to understand. Tucked into the fine print that people so often ignore is a clause that allows the company to change your interest rate (APR) at any time, for any reason, as long as they give you 15 days' notice.

Many Americans are inattentive about their credit card accounts.

Approximately 35 million Americans pay only the required minimum -- as low as 2 percent -- of their balance each month. Sticking to that rate, it could take years to clear their debt and they'll end up paying far more than the cost of the items or services they bought.

However, many of these 35 million cardholders could pay more than the minimum, and could possibly even pay off in full their balance some months. But they don't -- even though the interest rate they are paying on their credit card balance is considerably higher than what they pay on other things and compared to what they're getting in interest income from their savings account. Is this "financial illiteracy," or just human beings' "irrational behavior?"

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» There is no federal limit on the interest rate a credit card company can charge.

If you've ever looked at the return address on your statement, you may notice your credit card issuer is located in a state such as South Dakota or Delaware. That's because these are the states that have either weak or no "usury laws" meaning there is no cap on the interest rate that is charged. The federal government once had national usury laws that set a cap on the amount of interest that could be charged on a loan. But after the Great Depression, it repealed them and some states put no new usury laws in place. That's why Citibank, the issuer of Mastercard, moved to South Dakota, which has no cap on interest rates.

How long will it take to pay off a balance if you were to pay just the 2 percent monthly minimum?

Poll: What's Your Balance?

The average American household is carrying a credit card balance of $7500 to $8,000.

Which Are You?

Here's the credit card industry's jargon for its customer categories:

"Revolvers" roll credit card balances over month to month, never paying in full.

"Deadbeats" pay their balances off in full every month.

"Rate Surfers" or "Gamers" shift usage between credit cards based upon interest rates.

Significant credit card debt can put you at a markedly higher risk of bankruptcy.

Going bankrupt usually isn't the result of spending sprees. It's more commonly triggered by job loss, medical problems, or a divorce. Those hit by any of these misfortunes often turn to credit cards to stay afloat. But if they have trouble finding new sources of income or an illness keeps them off the job, they often cannot pay off their debt quickly, especially if their interest rate is high. "They get their feet tangled up in those high interest rates,and they just get sunk."

[Update: On October 17, 2005 a new federal bankruptcy law went into effect making it much more difficult to erase credit card debt by filing for bankruptcy.]