The mortgage crisis and other problems in the financial services sector are leading many credit card companies to change terms in an attempt to make up for lost revenue. Even cardholders with pristine credit reports and high credit scores need to pay attention. Consumers with less than stellar credit are especially vulnerable.<br />
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According to IndexCreditCards.com, for the week ending September 3 2008, the average Annual Percentage Rate (APR) is 12.29 percent for non-reward cards, 14.31 percent for reward cards, and 14.26 percent for student credit cards. Bankrate.com groups cards differently, with averages ranging from 11.34 percent for variable rate cards to 13.9 percent for cash back cards. Credit card holders that have been late with payments or over the credit limit could pay 32 percent or more.<br />
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In addition to raising interest rates, some credit card companies are lowering credit limits. If you carry a balance on your credit card and your credit card company lowers your credit limit, your credit score will drop since you are using a greater portion of your available credit. A reduced credit limit may also make it easier for you to exceed your credit limit. If you go over your limit, you will pay an over-the-limit fee averaging $36.10.<br />
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Late fees now average over $35, and more people are paying them. According to "Consumer Reports," collection actions are up about 20 percent over last year. Late payments and going over your credit limit will also trigger penalty rates, negatively impact your credit score, and in many cases, impact the APR you will pay for other credit cards you have in your wallet.<br />
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Credit card holders need to pay attention or they will likely end up paying more. To guard against rising costs, you should:<br />
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1) Pay Bills on Time. Not only will you avoid late payment fees and penalties, but over time consistently paying your bills on time will improve your credit score.<br />
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2) Pay Down Debt. If becoming completely debt-free is not an option, make paying down your credit card debt a priority. Your county extension office has information to help you pay off credit cards more quickly. Reducing the amount you owe generally raises your credit score.<br />
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3) Read Your Mail. Credit card companies can change the terms whenever they like, but they must notify you in writing of any changes. With some credit cards you can opt-out of the new terms if you agree to stop using the card. You will, of course, have to pay off the balance but the old terms will apply.<br />
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4) Shop Carefully for New Credit Cards. Read the small print very carefully. Credit card companies can essentially charge whatever fees they want as long as the terms are fully disclosed. For example, some cards come with very low credit limits, a high APR, and a variety of fees that may cause you to exceed your credit limit before you receive your first bill. Avoid credit cards that come with account set-up fees, program fees, monthly servicing fees, processing fees, and no grace periods.<br />
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5) Negotiate. If you feel that your credit card company has treated you unfairly, contact the lender. If you have not done so before, many lenders will give you another chance if you were late or have gone over your limit. You may have to ask for a supervisor since front-line customer service representatives may lack the authority to waive fees.<br />
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6) Complain. If you believe you have been treated unfairly and are not successful negotiating with your credit card company, submit your complaint in writing to the Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve, Washington, DC 20551. Be sure to describe what you are complaining about, including the name and address of the bank.<br />
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Source: University of Georgia Cooperative Extension <br />
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<I>Debbie Wilburn is County Agent/Family and Consumer Science Agent with Hall County Cooperative Extension (770)535-8290.</I>
