Advice About Credit Cards *

While easy access to credit generally can be a good thing, many seniors have fallen deep into debt because they have not been able to resist the overwhelming marketing of credit which has pervaded our society in recent years. The widespread practice by financial institutions of offering credit cards by mail is a large part of the problem. Like others, older Americans are enticed by multiple offers to get new cards, by low minimum payment provisions, teaser rates, no annual fee and high credit limits. These offers, however, never discuss the down side of a new card or its potential risks.

Things to Think About Before Taking A New Card:

• Avoid accepting too many offers. There is hardly ever a good reason to carry more than one or two credit cards. You should choose only one or two cards which are best for you. Having too much credit can lead to bad decisions and debts that you might not be able to manage.


• Interest rate is important, but not the only consideration. You should always know the interest rate and try to keep it as low as possible. A temporary low rate may encourage you to spend more than you can afford. You also need to watch for other credit terms that may add to the cost, so a card which appears cheaper may be actually more expensive. Annual fees, late charges, membership fees and the method by which balances accrue can add to the cost of credit.


• Beware of temporary "teaser" rates. These rates last only for a limited time, such as six months or less. After that, the rate automatically goes up, substantially. If you build up a large balance which will require you to pay beyond the introductory period, the much higher permanent rate is more important than the temporary rate. Often, teaser rates apply only to transfers of balances from other cards, but not to new purchases.


• If your rate is variable, understand the basis on which it may change. Some cards do not have a fixed rate. Variable rates can be very confusing. You may need help reading the credit contract to understand how and when your rate may change.


• Be careful about juggling cards to take advantage of teaser rates and balance transfer options. Some people constantly transfer their balances from one card to another to take advantage of new teaser rate offers. While this can keep your interest rate lower for a longer period of time, it takes a great deal of time and effort to juggle cards in this way. If you do not constantly monitor your temporary rates, or do not continue to receive teaser rate offers, you will soon be looking at carrying balances at high rates again.


• Watch out for late charges and penalty rates. If you miss making a payment on time, your credit contract may require that you pay high late charges. Even if you miss just one payment, your interest rate may go up, and you could forfeit your low rate.


• Learn your credit card's billing method. If interest will apply from the date of purchase without a grace period, a low rate may actually be higher than it looks. You need to understand how the grace period works and remember that many lenders do not mail bills until late in the grace period. Your payment may be due quite soon after you receive the bill in order to avoid additional interest charges.


• Most credit cards are unsecured and require no collateral. Avoid credit cards where the creditor is taking some form of collateral for the debt owed, such as a bank account or your home.

• If you do take a credit card and discover terms you do not like: Cancel!

• Avoid running up big balances, because you will pay the most interest. Do not fall into the trap of thinking that you can afford more credit just because you keep getting more credit card offers in the mail. Lenders use marketing profiles which show that you are likely to carry a big credit card balance and pay a great deal of interest. Don't run up the balance in reliance on a "teaser" rate.


• Do not use credit cards to finance an unaffordable lifestyle.


• If you get into financial trouble, do not make it worse by using credit cards to make ends meet.


• Don't get hooked on minimum payments. If you pay only the minimum, you will not be paying down the debt, or doing so very slowly. This not only increases the amount of interest you will pay, but if you make new purchases every month, your debt will grow, not shrink.


• If you can afford to do so, make your credit card payments on time. This can avoid late payment charges and penalty rates. You should know that most lenders will waive a late payment charge or default rate of interest one time only. It is worth calling to ask for a waiver if you make a late payment accidentally, or with a good excuse.


• Avoid the special services, programs, and goods which credit card lenders offer to bill to their cards. These products are often overpriced, and add to your cost of credit, because interest is being charged.
  Examples: credit card fraud protection plans, credit record protection, travel clubs and life insurance.


• Watch out for unsolicited increases by a credit card lender to your credit card limit. Do not assume this means that you can afford more credit.

• Your name and account number


• The dollar amount in dispute


• A statement of the reason for the dispute.

• I did not authorize this charge;


• I did not receive the goods I ordered.

Article Source: http://freelegalinformation.info

Published by: Illinois Legal Aid