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Credit Card Blues

With all the holiday bills piling up, you may be tempted to take advantage of the credit card offers stuffing your mailbox.

One, in particular, seems innocent enough: Skip a monthly payment so you can catch up on your holiday bills.

“Don’t do it,” said Sonny Colley, president of the Consumer Credit Counseling Services of the Savannah Area. “By not paying your monthly credit card payments, you end up paying more interest – and that adds up.”

You may also be tempted to start looking for new credit cards with low interest rates. Just make sure you read the fine print, he advised.

For example, some credit card solicitations come with permanently low rates like 3.99%. But then there’s another, more dangerous breed: the credit card that starts with a low interest rate, of say 4.9%, but soars to 20% after six months, or when the introductory period ends.

“Toss that one in the garbage,” Colley said. “Interest rates are a large reason that people fall into debt, especially around the holidays. Stick to an interest rate that is livable and one that you can afford.”

He notes that some credit card subscribers have been successful at “rate hopping,” or the practice of transferring high-interest credit card debts to cards with low introductory rates. Then, they repeatedly transfer them to the next low-interest card before the rate goes up.

However, this can cause problems, especially if the subscriber stops receiving the offers and ends up stuck with a high rate, because no other credit card company wants the business.

“Rate hopping is a tricky challenge,” Colley said. “It’s not a good idea for a lot of people. It often pulls down their credit score because their credit is checked more frequently.”

Other things you need to understand:

• Some credit cards offer frequent flier miles, credits for gasoline, or points toward catalogue purchases. However, only people who are disciplined about paying their full balance every month actually benefit from these programs.
• Vanity cards may be prettier than a standard credit card because they have the logo of a favorite team or college. But, they have some of the highest interest rates around. “Just get a bumper sticker or t-shirt instead,” Colley says.
• Universal Default Clause. This fine-print rule in your terms and conditions states that if you miss one payment (i.e. that new car you bought) the credit card company can increase your interest, even though you have been on time with payments in the past.
• Sometimes you'll see the words, “pre-approved” on the envelope, and jump to the conclusion that you can't be turned down. If you read the fine print, however, it may read “pre-approved to apply,” which makes no sense because anyone can apply.

Remember, Colley said, “It’s up to you to protect yourself. Understand that credit card companies don’t come bearing gifts, unless it’s something that benefits them.”

Sonny Colley is president of the Consumer Credit Counseling Services of the Savannah Area. Web site: http://www.cccssavannah.org/