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Be smart about credit cards

 

Last updated 1/3/2008 at Noon



When it comes to spending with credit cards, many consumers tend to rack up high bills. It may be because it is difficult to ascertain how much they’ve spent when simply sliding plastic at the store.

Another reason people overspend is due to the often misunderstood language included with each credit card bill they receive. Important information is often printed particularly small in the hopes that people won’t, in fact, read their agreements and will fail to notice any changes in policy.

With the credit card season here, consider the following tips before putting it all on plastic over the next several weeks.

Shoppers should know their credit card limit and their current balance. In the past, people who charged a card that was over its limit would have to go through the embarrassing ordeal of being told their card was declined.

These days, many credit companies have chosen to go a different route, allowing consumers to overcharge their cards and then face exorbitant fees and increased interest rates once the limit is exceeded.

Before shoppers leave their houses and swipe their cards, they should know how much they can spend before reaching their limit, and avoid exceeding that limit at all costs.

Pay on time. Sometimes the day a bill is due each month changes. While it might be due on the tenth one month, the next due date might be the eighth day of the following month. This can, and often does, lead to late payments and late payment fees.

A late fee is often in the neighborhood of $35. But a late payment also allows a company to invoke a penalty rate, which can be as high as 27 percent.

In each agreement, it will likely say this rate can be issued after as little as one late payment, so a card holder can’t assume that since this is the first time she/he’s late there will not be any penalties.

Avoid these penalties by paying on time and knowing when the due date is each month.

Avoid cash advances. Particularly during the holiday season, a cash advance can be very enticing. But cash advances should be avoided.

Most cash advances will include a fee for the advance and a higher interest rate than the actual credit card, making the cost of a cash advance far more than it actually appears.

Verify charges. Shoppers should verify any and all charges on their card by keeping their receipts and checking them against what appears on their statement.

This will accomplish two things. First of all, they’ll catch any fraudulent charges if they exist. Secondly, they can examine their spending habits, which may or may not be healthy.

Don’t get tied down. People can shop for a credit card just like they can shop for holiday gifts. Not all cards are the same, as some carry higher interest rates than their counterparts.

Research companies, their interest rates and policies and politely ask friends if they would recommend (or not recommend) any companies.

Credit card holders can take the results of their research to their company and then negotiate a new deal with them or move to another company.

 

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