Banks are routinely raising interest rates and fees as they try to dig their way out of a mountain of bad debt. Without paying attention to that little piece of plastic in your wallet, you could find yourself in the same position as the banks. The problem of course is you have no one to pass the increases onto. What can you do to minimize the chances of getting hit with higher interest rates and fees? Listed below are five tips that you should read and then act on.
Start with the right card for you.
If you got your credit card through one of the pre-approved mailers, chances are you could have done better. Read the terms and conditions and jot down the existing rates and fee schedule then research the web for a better card. If you want the lowest rates and fees, then consider those as the “perks” rather than rewards or cash back programs.
Pay on time
A single late payment probably will not cause an increase in your rates. However, missing the billing cycle altogether can result in a doubling of your interest rate plus a late payment fee. It may also affect other cards that you have as well even if they are with competing banks.
If you are still relying on paying off a paper statement by writing a check and mailing it in, you should consider switching to electronic payment. Every major credit card has a site where you can review your transactions, current and past statements and electronically pay your bill. Many also have email alerts to let you know the statement is ready, that payment is due and a number of other alerts. By paying electronically there is no question as to when the payment was received.
Many banks have online bill paying programs that work similar to the credit card sites. Bank of America for example, can link to the card site and you can view your statement while banking on line. The system allows you to determine what you are going to pay and when you want the card company to receive the payment. This gives you much greater control than relying on the Post Office to get the statement to you and get your payment to the credit card company.
Know your credit limit
Do you know what the limit is on each of your cards? It may have gone down since the last time you received your statement. Find out what the limit is for each card and respect that limit. Going over the limit will produce a fee charged to your account and may trigger an increase in rates as well.
Carefully monitor all personal finance actions
What your credit card company charges you is not based solely on your business with them. They can take into consideration the way you deal with other creditors like mortgages, car loans and medical expenses. Insure you are meeting at least the minimum requirement to keep those accounts current.
If you have already been hit with huge increases, consider going to a non-profit credit counseling service. These organizations can assist in getting a realistic budget put together and can work with your creditors to either modify the payment terms or reduce the interest rates being charged. Why would a creditor reduce rates for a credit counseling firm when they typically won’t when dealing with the card holder? Creditors know that the counseling firm is a third party that is fully aware of your financial position and ability to pay. Consequently the creditor sees the recommendation as the best way to get paid rather than sending it to collections.
In simpler times, managing personal finance meant sitting down at the kitchen table on the first or fifteenth of the month and writing checks. That unfortunately is not the case anymore. Follow the tips above and remember this basic personal finance rule “Don’t Buy Stuff You Cannot Afford”