Become a Credit Card Shark
Don't be a fool when it comes to managing your money
You may think of your credit card as an old pal who's stuck by you, making your life richer and your bank account poorer. But this past year, that friend may have stabbed you in the back of the wallet.
The problem is that credit cards aren't as nice as they used to be. The interest rate on balances is on an upward swing, typically tied to the Fed's interest rate action. There have been 13 hikes since June '04, and analysts predict that rates will keep inching up in '06. Then, too, many issuers are cooking up new hidden fees and levying stiffer penalties to boost their bottom line.
What all this means is that '06 is the year to learn how to live in harmony with your existing card(s)--or else go shopping for a new plastic pal.
1. See how low your rate can go. The standard variable rate card has an average 13.4 percent annual percentage rate, or APR, but some go as low as 10 percent. Shop for a lower card rate (box, Page 74). If you find one, then you might tell your card company you'll switch unless it can do better. According to a study by the U.S. Public Interest Research Group, asking for a lower rate works 56 percent of the time. Oh, and don't assume that a fixed-rate card is fixed forever. Issuers can change their rates with as little as 15 days' notice.
2. Don't be late with any bill. Nearly half of all credit card issuers now impose what they call a "universal default clause" rate hike. If you are late paying another bill--car payment, student loan, mortgage--your credit card issuer might spot the screw-up on a routine check of your credit report and then up your interest rate--sometimes to as high as 35 percent. Going over your credit limit, bouncing a payment check, or just plain having too much debt can also trigger a rate hike. And they don't even have to tell you. The law gives them that very annoying right. So in addition to checking the charges on each statement, you need to check your rate, too. Most banks will reduce the higher rate if your credit history improves over six months--and you ask them to review your case.
3. Don't let the grace period fool you. No, it's not your imagination: The interval between the billing date and the due date is shrinking, from 30 days to 20 or less. There may even be a due time--like noon on January 13. So the minute that envelope comes into your home, open it. "You can get hit by a penalty even if you are late by an hour with a payment," says credit expert Gerri Detweiler. And how come the due date is always some strange day, like the 13th or the 22nd? Perhaps it's because credit card companies know that you're more likely to miss an offbeat deadline. But you can call your issuer and ask to have the due date changed to a time of the month that fits into your bill-paying routine. Meanwhile, a no-late-fee card may seem like a salvation--Citibank's new Simplicity card, for instance, promises no penalties for tardiness if you buy something each month. But such cards often jack up the interest rate if you are indeed late, and any late payment will be noted on your credit report.
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