The thing about credit cards is that they make your daily life so convenient. Swiping for anything is so easy and the banks make it look so fun and glamorous, that before you know it, you’re way above your head in debt.

But here’s one thing the banks don’t want you to know. You know those interest rates, penalties and charges in your credit card Terms and Conditions? Those penalties they slap on your account whenever you miss out on a payment? Those are illegal.

Yup, the Supreme Court has ruled time and time again that a monthly interest rate of 3% is unconscionable, iniquitous and excessive. Check out what the Supreme Court said in the case of Chua vs. Timan*:

The stipulated interest rates of 7% and 5% per month imposed on respondents’ loans must be equitably reduced to 1% per month or 12% per annum. We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law.

If 3% monthly is already considered immoral, iniquitous and all sorts of bad shit, how much more the 9%-11% monthly penalties stipulated in your credit card’s Terms and Conditions? It’s flat out illegal, so all you need to do is slap a huge, thick law book on your credit card collector’s face to make him go away right? Not quite.

The bank is banking (pun intended) on you not knowing that, and then even if you are aware of it, you will need to have the excessive charges struck down by a court of law. That means hiring a lawyer, paying his/her appearance fees, settling the docket fees etc. But don’t worry, the aggravation of being embroiled in a lawsuit is free of charge. Believe you me that the bank will not magically reverse their charges just because of your knowledge of the law.

Also, the charges will not be totally removed by the courts, they will most likely only be minimized to 1%-2% monthly, with a 12% per annum charge tacked on from the moment the bank sent you a demand. In short, you will still need to pay your debt.

And so the first rule of credit card ownership still remains: Always pay your balance in full every month.

But what happens if you can’t pay off your debt at all? Then this very informative site will prove handy.

* G.R. No. 170452, August 13, 2008.

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