Thoughts on Debt

Credit cards can be a very helpful tool, but they can also be one of the biggest financial pitfalls if you are not careful.  There are some things that you need to know when applying and using credit cards.  The following are some tips to using your credit cards wisely.

1.  Make sure you are aware of changes in rates and rules.

2.  Pay your balance monthly, even if it means taking out a personal loan.

3. Apply for a card with a credit union instead of a bank, they have less fees and lower interest usually.

4. Don’t use credit cards when traveling abroad.  Conversion fees are steep, instead use an ATM machine to access your bank account or use traveler’s checks.

These are just some wise tips in using your credit cards, however, there is a whole other realm of credit card use that you must be aware of.  This is when the credit card companies change rules mid stream or offer low rates to draw in your business and then raise them without you being aware.  Some recent reports show that consumers have been fooled by some of these “tricks” and so these are the things that you need to be aware of.

YOUR RATES ARE RAISED WITHOUT YOUR WARNING

You are going along and paying your bill on time but you have a late payment on another card, or your credit score drops for some reason and the credit card company raises your rate on all of your cards.  Even if you come close to your credit limit, this can cause your rate to increase even if you haven’t exceeded it.  If this happens your credit card company is required to let you know so be sure to read all the correspondence from them carefully and keep a close eye on that bill.  No one needs surprises like this, and it is perfectly legal.

YOUR DUE DATE CHANGES

On late payment can allow them to raise your interest rate higher then you probably even think is possible.  Due to this, some banks unknowingly will change the due date on your bill, so that your payment is due sooner than you originally thought, causing your payment to arrive late and giving them license to raise your interest rate.  Again, look at that bill very carefully as this is another completely legal practice.

EXTRA CHARGES AND PENALTIES

Know how much extra your credit card company will charge you for cash advances and balance transfers before doing them.  Large fees can be associated with these types of transactions and once you do them, you will be stuck with the bill.

MISLEADING INTRODUCTORY RATES

You will receive credit card offers for low interest credit cards, and you think this is great and you transfer your balances or run up the card and then you find out that the interest rate shoots up to about 30% after the first month.  Be sure to read the fine print and keep in mind that if an offer seems too good to be true, it probably is.

MANDATORY ARBITRATION

Keep in mind that about 75% of credit cards have clauses that say disputes must be resolved in private forums, so when issues arrive you can’t take them to court.  Even if those issues are ones of identity theft or things that are out of your control.  Studies have shown that if you take a company into arbitration you will lose since in arbitration the credit card companies win on the average of 96% to 99% of their cases against consumers.

In short, be sure to think twice before buying on credit, and be even more rigorous about reading your credit card statements and applications.  These are the keys to keeping your money in your hands.