This is a guest post from LaToya Irby.
Just a couple of weeks ago, the President signed a set of credit card rules that will protect credit card users from many predatory tactics used by card issuers. For example, credit card issuers won’t be allowed to hike your rates on a short notice.
Though the rules aim to lower credit card costs, quite the opposite might happen. Many analysts expect credit card issuers will raise credit card costs to continue making profits. But, smart credit card users can keep paying little to nothing for the convenience of using credit cards. Here’s what you can do to be one of those people.
1) Don’t carry credit card debt.
Credit card companies make much of their money from revolvers – users who carry a balance beyond the grace period. If you pay your credit card bill in full each month, you won’t get charged interest and will wind up paying nothing for using credit. There’s one exception: cash advances generally have no grace period and begin accruing interest the money they’re taken out.
2) Look for lower interest rates.
Ideally, a high interest rate won’t matter because you pay your bill in full each month. But, I know there are some people who inevitably carry a balance. For those people, a low interest rate will help save on interest charges. If you have a good credit score and positive payment history, ask for a lower credit card interest rate or move your balances to a low rate card.
3) Pay on time.
Late credit card payments lead to late fees as high as $39. They also trigger interest rate increases on your balance. Fortunately, the new credit card rules ended the “universal default” practice in which credit card issuers raised your rates even when you were late on another card’s payment. But, you still face a higher rate on the credit card that was paid late.
4) Pay ahead of time.
If you try to make a phone or web payment on the day your payment is due, you could face a fee for the expedited payment. These payments typically range from $5 to $15 and can easily be avoided by paying your bill well ahead of time.
5) Check your balance and credit limit before spending.
Right now, credit card issuers aren’t required to notify you before lowering your credit card limit. Before you use your credit card, call the number on the back of your card to confirm your credit limit and available credit. That way, you avoid going over the limit and getting charged an over-the-limit fee.
6) Ask for the annual fee to be waived.
Annual fees were becoming an endangered species, but they’re expected make a comeback as credit card issuers work to sustain profits. If your credit card has an annual fee, call customer service and ask how you can reduce or eliminate the annual fee. Many credit card issuers will waive your rate if you’re a good credit card user.
7) Report lost or stolen credit cards immediately.
Federal law limits your liability for fraudulent charges, but the amount you’ll have to pay depends on how quickly you report a loss. If you report a lost or stolen credit card before any charges are made, you won’t be liable at all. However, if you wait, you could be responsible for up to $50 of charges.
But, Remember…
You don’t have to have a credit card. So if it seems like using a credit is too expensive, remember that cash is always free.
I'm MLR. After graduating from college debt free, I decided to write a blog encouraging people to adapt responsible and sensible personal finance rules.
June 11th, 2009 at 8:17 am |
Great post LaToya!
Of the 7 ways you suggested I strongly feel for #1 and #3. Keeping the credit card balance within limits and paying it off on or before due date are the two most essential ways for keeping out of the quagmire.
Having said that, however, while I agree that “cash is always free” I also try to use at least one credit card in a calculated manner. Having some balance on our credit card accounts and paying it off on time is a way to prove our sinceriy towards (kind of a) debt. After all this is what lendors/home owners/emloyers are looking for in our credit reports!
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June 11th, 2009 at 11:02 am |
@AG You’re right. It’d be an injustice to our credit scores to avoid credit cards all together. I think if you’re going to carry a balance at all, you should make sure it’s on a low rate card, that the balance is a small percentage of your credit limit (10%-30%), and that you can actually afford to pay it off. It sounds like you’re smart and proactive about the balances you carry. Too many people use credit cards to postpone payments and they end up paying the balance off for years.
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AG Reply:
June 11th, 2009 at 6:04 pm |
@LaToya Irby, hehe thanks for the appreciation! Thanks to my parents who adopted healthy money habits and thanks to my memory that captured all this years ago and now is playing back to me. Time for me to follow the theme and share what I learn on my way :)
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June 11th, 2009 at 12:22 pm |
“Cash is always free.” Haha.
Although I gotta disagree with not having credit cards. Have credit cards for emergencies. Build up good credit and pay it off every month. Credit card companies hate people who do that. Make the CCC hate you!
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June 12th, 2009 at 3:25 am |
The best practice for the current economy climate is to use your credit card like a charge card, paying the balance in full every month.
Restraint yourselves from spending the money you don’t have.
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AG Reply:
June 12th, 2009 at 8:06 am |
@ACC, I believe that’s should be your strategy at all times :)
AG´s last blog ..Welcome BargainBabe Readers
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June 17th, 2009 at 4:39 am |
I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future. Thanks!
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June 19th, 2009 at 4:41 am |
This is a really great guest post :)
Some very sensible tips here about how to avoid credit card costs – after all, interest rates are typically so high, we should not have to pay any extra if we don’t need to.
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September 25th, 2009 at 3:20 pm |
Credit cards for someone w/ a bad credit score were designed to rebuild credit that had been damaged. For those with no credit or poor credit there are secured credit cards, “bad credit” credit cards and debit cards but there are also unsecured cards that can be used for this purpose. These cards generally come with low credit lines (around $300) and additional fees. This kind of card will not allow you to go on shopping sprees but it will certainly help you restore your damaged credit history.
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November 29th, 2009 at 9:39 pm |
My girls and I we’ve owned more prepaid credit cards over the years than we can count, including Rushcard, Greendot, etc. But, the last few years we have found that one is the best for our needs AccountNow Visa. Why? Because I was happy to discover how well-designed and smooth to use the underappreciated (and widely mocked) AccountNow Visa’s are.
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