Mark Lopez recently signed the bankruptcy papers he hopes will help him climb out of debt. Like a growing number of Americans, he charged his way into a deep financial hole.
"The cards started coming in the mail," he said. "By the time I knew it, I owe $4,000 on one and I owe about another $2,000 on another and I'm way over my head."
As a construction worker making just under $40,000, Lopez racked up more than $10,000 in credit card purchases. But his real problem started after a couple of late payments, when his interest rates ballooned from 6- and 7 percent all the way to 29.9 percent.
"It was just a mess," he said.
It turns out those low APR's are for people with virtually perfect credit. Pay late by even one day and so-called "risk based" interest can go sky high. What about your "fixed rate"? With just 15 days notice they can raise your rate to whatever they want. And that's how people end up buried in debt.
Just take a look at the numbers. A $1,500 bill at 7.9 percent will take 8-and-a-half years with interest payments of $372. At 23 percent, you're looking at 17 years and more than $2,500 in interest. And at 29.9 percent? Thirty years and more than $6,000 to dig your way out.
"Loan sharks are more honest," says bankruptcy lawyer Charles Juntikia. He said the card companies target people with modest incomes, and inundate them with offers of easy credit, knowing they're the most likely to pay late.
"They're looking for that first late payment, they have all their computers set up," he explained. "You pay late one day and instead of 12 percent or 9 percent, it becomes 29 percent."
James Chesson of the American Bankers Association says that without risk-based pricing the rest of us would be subsidizing the poor credit risks.
He said that typically, if a consumer plays by the rules, never misses a payment, never exceeds his credit limit, his credit card rates shouldn't change.
But that wasn't the case with Ira Brickman. He consistently had very good credit. His credit score is 738 out of a possible 850, which is not very poor, poor, fair or good -- it is excellent. He never missed a payment; never been late -- never. Yet he saw his "fixed rate" of 9.9 percent, first go to 12.99 percent and then to 19.98 percent.
And it wasn't because he had done anything wrong. Brickman was penalized for what he might do. Because he was close to his credit limit and only making minimum payments, he became a "risk".
"So you raise my interest rate so that it's more difficult for me to pay?" he asked.
But Brickman found his own solution to his credit dilemma. He's about to take out a 2nd mortgage on his house to pay off his card. At least this way, he says, his "fixed rate" will stay fixed.