Tips For Credit Card Users
Credit card companies make credit more costly than necessary by manipulating payments to keep the highest-cost balances from being paid off and by imposing hidden, hard-to-understand penalty interest rates.
The following tips may help you protect yourself from such credit card practices. Please don't forget to share your own story and tips.
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Scrutinize all credit card offers and terms, especially the “fine print”
Don’t be fooled by teaser rates and cash advances. Under current policy, teaser rates can last a much shorter term than you might anticipate. A cash advance will raise interest rates for longer than expected—a single cash advance can still raise the interest paid decades later if an account is never paid in full.
Segregate your card use if possible
Customers with enough available credit should use separate cards for borrowing at a promotional rate, making purchases, and taking cash advances. If each credit card has only one type of balance, borrowers can control the allocation of payments by paying the most to the card with the highest rate.
Pay the highest APR balance first
If you are able to segregate your card use, pay anything above the minimum to the card with the highest APR balance first.
Don’t assume that events triggering a penalty could never happen to you
Making a late payment just once (even if it is not your fault) can trigger a penalty. In addition, conduct that does not in any way breach your credit card contract can trigger a penalty rate. For example, increasing balances on other accounts or even just changes in the way your loans get reported to the credit bureaus could trigger a penalty.
Avoid credit cards that include penalty rate options
Try to avoid card offers that include penalty rates. Although over 90% of solicitations have a penalty rate, it is still possible to find a credit card that does not have one. The card issuer can amend terms to add a penalty rate later, but they have to notify you if they do.
Watch your statement closely
If you have a card that includes a penalty rate, take a look at your APR every time you get your monthly statement to make sure your account has not been repriced. If it has, try to move that balance elsewhere. If you cannot transfer the balance, try to pay down the balance as soon as possible, and do not charge anything further on that card.
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