Investment & Financial Articles
Title: Avoiding Credit Card Traps
Author: James H. Dimmitt
Article:
The next time you open your credit card statement, take a closer
look at the small insert titled "changes to your credit card
agreement". You know the one I'm speaking about. It's that
small, folded paper written in legalese that you promise to read
some other time (but of course that time never comes) or you
just discard it with the other "junk" inserts.
First and foremost you must understand that using your credit
card after you've received this notification results in your
automatic "agreement" to the new terms in the notice. To prevent
these new terms from affecting your account you must stop using
that credit card immediately or by the date given in the
notification statement.
The most common modifications to credit card agreements include
new APR's (annual percentage rates), new fees and/or changes to
existing fees, or a change to the grace period on your account.
The grace period is the number of days during which any credit
used for purchases may be repaid in full without incurring a
finance charge.
Not knowing or not keeping track of the dollar amount limit on
your card is another trap you should avoid. Credit card issuers
will allow you to charge a small amount over the limit set on
your account. However, don't be surprised when you get hit with
an "over limit fee", usually around $35.00 or higher, on your
next statement. Also, be prepared for your APR to be increased
if you go over your credit limit.
You'll also trigger an increase to your interest rate if you
miss your payment due date. Some companies consider your payment
late if not received by noon or 1 p.m. on the date due. Along
with the higher rate, you'll also pay a "late fee" of $29 on up.
Be sure to use the company's preprinted envelope when sending
your payment. These envelopes allow the pre-printed bar code to
be scanned by the post office so that it can be delivered more
efficiently.
If you've counted on those few extra days from the time you mail
your check and the time the check clears your bank, beware! Many
credit card issuers have switched from the traditional method of
processing checks to a new electronic process. This new system
shaves off a day or more from the traditional method it normally
takes for your check to clear by electronically debiting your
account.
If you're considering paying your credit card bills online,
check to see if any additional fees will be charged for using
this type of payment. I recently received an e-mail message from
one of my credit card companies announcing how easy it would be
to make my payments online. Included in fine print at the bottom
of the e-mail was this note - "A fee of up to $14.95 may be
charged for this service and will be deducted from your checking
account". Hmmm, spend 37 cents on postage and mail my payment
five days before the due date or pay now and get charged an
additional $14.95 fee? I'll bet you can guess which choice I
made.
Taking the time to carefully read and understand your credit
card agreement now will help you save money by avoiding
unnecessary fees or climbing interest rates later down the road.
About the author:
James is editor of "To Your Credit" a FREE weekly newsletter
focusing on money management news and tips. You can subscribe to
his newsletter and also get a FREE copy of your credit report
when you visit: http://www.yourfreecreditreportnow.com
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