Tips For Credit Card Users

Reforms have eliminated many unfair fees and practices that made credit cards more costly than necessary. But consumers must still beware.

  • Scrutinize offers, especially “fine print.”

    Don’t be fooled by teaser rates, which can expire quickly, or by cash advances, which can raise overall interest costs significantly, even decades later if an account is never paid off in full.

  • Pay more than the monthly minimum.

    That will save a bundle in interest costs—as much as $2 for every extra $1 you pay. A card issuer must apply every dollar above the minimum to the balance with the highest rate. But even if you have only one rate, paying more than required saves money.

  • Avoid cards with penalty rates.

    More than 90% of solicitations are for cards with penalty rates, but cards without them exist. A card issuer can alter terms to add a penalty option later, but it must first notify you.

  • Know what triggers penalty rates.

    Just one late payment, even if not your fault, can cause a rate hike going forward. Even conduct that doesn’t breach your credit card contract can trigger a penalty rate—balance increases on other accounts, for example. Two late payments in a row can trigger a penalty rate on existing balances. Watch your statement. If you card allows a penalty rate, check your APR every month. If you rate goes up, move your balance elsewhere. If you can’t, don’t use the card and pay it down ASAP.

  • Avoid payment insurance.

    It promises to make card payments if you get fired or sick, but it’s invariably overpriced and full of loopholes companies use to avoid paying out anything.

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