...I think the credit industry is out of control and deserves to be taken to the cleaners.
Well, resist or perish. Dunno who said it, but they get you overwhelmed first with credit and then beat you with the interest. g>
Control credit card costs
Keep interest rate down
By JEAN CHATZKY
DAILY NEWS PERSONAL FINANCE COLUMNIST
Credit card rates can go up due to a variety of reasons.
Quick quiz: Which of the following can trigger a hike in the interest rate on that piece of plastic you're toting in your wallet (i.e., your credit card)?
A. A drop in your credit score.
B. Paying your mortgage, car loan or other loan late.
C. Having too much credit available to you.
D. Getting another credit card.
E. Asking about a car loan or a mortgage.
The shocking - and disturbing - answer? All of the above. That's right, folks.
Despite the fact that none of these things have anything to do with that particular piece of plastic, they can result in a hike in your rate as high as 29.99% at big banks like Citibank and Providian.
That's the result of a new survey from the California-based group Consumer Action. The group studied 47 card-issuing banks between April and June of this year. It found 21 of those banks regularly hike rates for these sorts of "universal defaults" - in other words, the ways you handle your other credit accounts.
Poor handling of the particular cards you carry can, of course, have its own problematic results. Paying your credit card bill late, bouncing a payment check or going over your credit card limit can send your rate soaring into the mid-20% range.
You don't have to do it more than once, either. Of the card issuers who assess customers with penalty rates for these sorts of behaviors, 43% said it can happen the first time you pay your bill after it's due.
Get hit with a couple of these punitive rates and it can get expensive. The average American household carries about $8,000 in credit card debt.
At 13% (the average variable rate on cards these days according to the survey) carrying that debt will cost you $1,040 a year.
At 24%, though, you're looking at $1,920. In my opinion that first number is way too large (if you're carrying $8,000 in credit card debt, it's time to work on paying it down). The second number is just plain ridiculous.
What can you do to make sure you're not hit with default and penalty rates?
First, keep your nose clean - and your credit score as high as possible. That means knowing what it is, of course. Starting last week, you could get copies of your credit reports (but not their scores) from each of the bureaus for free once a year.
Second, stop applying for credit you don't need - store cards, home equity lines of credit, all of it. Each inquiry lowers your score a bit more.
Third, and above all: Pay your bills on time. I do this online so I can schedule payments in advance and it makes life much easier.
If you've already been penalized, how long will it take to bring your rate back down?
Half of the banks that impose these polices said that six months after cleaning up your act your rate may be reduced, although not necessarily to the original rate, and not necessarily without asking.
As is always the case, it's a smart move to pick up the phone, call your card issuer and ask for a reduction in your rate.
If they say no, ask how long you'll have to be on good behavior in order to merit a decrease.
Then ask to make a note that they said so in the computer. That way, when you call back again (as you should) because you did as they asked, they'll have little choice but to follow through.
nydailynews.com |
