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High Credit Card Rates before the Holidays

Just when you thought things cannot get worse, it did. Millions of Americans who are already struggling with the economic downturn and credit card debt have received notice that their credit card companies are raising interest rates – just in time for the holiday season. Many have seen their rates doubling, some even tripling. Cash-strapped individuals are looking at more debts ahead.

The situation is worse for certain individuals. Those who are used to longtime fixed rate will see their interest rates soar to double-digits because of the shift to variable rates. Most of the activities such as giving consumers lower credit limit, interest rate hikes, and the increase in minimum monthly due are tied to the new federal policies set to start in late February. These measures will hinder banks from continuing their predatory practices.

As a result, the trend these days pose very little options to the ordinary consumers. According to customer surveys, consumers are now faced with unpleasant alternatives ranging from closing accounts to accepting tight credit terms. Rasmussen Reports conducted a survey which also revealed that around 50 percent of its respondents experienced rate hikes in the last six months.

At a time when banks are seen as the villain, these measures are greeted with censure. The legislative director of Consumer Federation of America said that “It seems like they’re hurting the customers they need the most.” Right now, the industry has already lost the trust of clients but they are still coming up with tricks to milk more money from struggling clients.

One method that was uncovered includes making notices of interest-rate hikes look like junk mail. Their purpose is to encourage consumers to throw these letters out without reading them. Everyone is affected by the current trend – whether you have a poor credit rating or the highest.

Credit Card Debt – The Worst Things You Can Do

When it comes to money, no one can make all the right decisions all the time. Most people have done things they later regretted, especially when it comes to credit card debt. It may be a simple thing like getting charged $3 for withdrawing cash from an out-of-network ATM machine or a big mistake like maxing out your cash advance option without any apparent means to pay for it.

Some mistakes are easily resolved while others take years to sort out. Whatever the case, blunders happen when it comes to money management. The important thing is to understand the severity of the transgression. So in this article, we will score common mistakes on a scale of 1 to 10 based on its impact on your finances:

Paying Past Due Date: 5.5

Credit card issuers are never happy with late payers. Because of this, they have severe penalty charges and charge high interest payments for individuals who pay past the due date. In addition, some issuers even report your transgression to the credit bureaus so your credit score will suffer as well. If you’ve been an on-time payer in the past, some companies may let it slide. Just make sure to call them and ask them to waive the interest fee as well.

Paying the Minimum: 5

Generally, credit card companies earn the most from slow payers. Paying only the minimum might not affect your credit score but you might end up paying more on the interest than the principal. This is not a good practice because it keeps you in debt for a lengthier timeframe.

Missing a Payment: 9

This is one of the worst mistakes you can commit if you have a credit card. You will be slammed with high interest rates, penalty fees, and other charges. As if that’s not bad enough, your credit score will also take a huge hit. Because of this, you will need to pay more when you take out a loan next time. In essence, missing a payment is a no-no. Pay the minimum at the very least.

Credit Card Rewards – What you Should Know

Approximately 34 million Americans were late in making their credit card payment in the past year. As if that’s not bad enough, the default rate in 2009 is at its highest since 1991. It all points to the fact that consumers simply do not have enough money to pay back their debts. These days, missing a payment or two seems inevitable for a variety of reasons.

However, while many consumers recognize that they would need to pay higher interest payment and penalty fees, they fail to realize that they are also damaging their credit card score and even sacrificing their credit card rewards. In the last several months, consumers are heavily preoccupied with asking questions about fees, interest rates, and due date of their bill. One aspect they overlook is the rewards program offered by their card issuer.

Rewards might not be an issue for first-time card holders who don’t know better. But for individuals who had been using it for vacations, household appliances, and special occasions, loosing reward points can come as a big blow to their lifestyle. In a research conducted among major credit card companies like Citibank, Bank of America, American Express, and Capital One, it was revealed that institutions will revoke any points you earn during a billing cycle in which your account was delinquent.

Discover Cards is particularly harsh because it revokes all reward points you earn if your account is delinquent for two months. American Express is likewise strict but it revokes points on a case-by-case basis. The rules may seem harsh but what’s even worse is that all major credit card issuers reserve the right to modify the terms of the agreement at any time, for whatever reason they choose. They can even cancel the program at any time. So while consumers can now avoid the loopholes when it comes to interest payments, they are still at the losing end when it comes to rewards.  Some of the new credit card laws will prevent the issuers from making changes to your account without prior notice.

New Credit Card Laws – New Details

It is no secret that the new credit card legislation will have a drastic effect on how banks and other financial institutions operate their business. The changes on your account can be likened as a double-edged sword. On one hand, certain changes can help you manage debt easier and attain debt management help. On the other hand, the new laws may also be confusing to consumers who are used to seeing the same charges on their bill every single month. To help you better manage your credit card charges; below are specific changes that had been implanted:

Interest Rate – in many banks, the annual percentage rate (APR) on existing balances will not increase if you pay late or exceed the credit limit. It will only increase if to the default rate if you fail to pay for the new transactions when it is due. It is also important to take note that consumers are encouraged to review their account periodically to determine if their APR should be lower than it is.

Grace Period – the grace period for repayment is more generous with the passing of the new credit card legislation. It can potentially help you reduce the amount of finance charges you need to pay. In addition, overlimit fee will no longer be charged. Be sure to check the terms of your card for further details.

Payments – the amount you pay in excess of the minimum payment due will now be applied to the highest APR balance first. This is a welcome change from previous practices because it helps you pay off high APR balances a lot sooner.

Payment Processing Time – another important change to the new bill has to do with the payment processing time. Mailed payments can now be processed on the same day as long as the banks receive it before their cut-off time.