Credit Card Tips

The Credit CARD Act, signed by the President on May 22, 2009, finally became effective on February 22, 2010.  This new law is a huge victory for consumers, and prohibits some of the worst tricks and traps of the industry.  But there are still reasons to be wary.   We offer tips on finding a good credit card here.  On this page, we offer some advice on how to protect yourself when using a credit card that you already have.

Don’t Let Your Guard Down. 

Once you choose a card, your credit card company can still change the rules.  Read your mail – a nondescript mailing may include a change in terms relating to your interest rates, fees or due dates.  And remember that if you get a card with a low introductory rate, that rate probably won't last more than six months.

Avoid Late Fees. 

Pay your bill several days in advance of the due date to avoid hefty late fees.  Even worse, if you are late two months in a row, your rate can be raised dramatically, even on existing balances.

Pay in Full, or as Much as You Can Manage. 

By paying in full each month, you can avoid paying interest on your purchases.   Even if you can’t pay in full, pay more than the required minimum payment unless that really is all that you can afford.  Be sure to carefully read your monthly statement – the new law requires the company to tell you how long it would take to pay off your entire balance (and what the total of your payments would be) if you make only the minimum payment each month.  It also tells you what monthly amount would be needed to pay off the balance in three years.

Do Not Agree to Let Your Credit Card Company Approve Over-the-Limit Charges.

Under the new law, your credit card company can’t charge you an over-the-limit fee unless you give them advance permission to do so.  If you don’t give that permission and then charge something that would take you over your limit, the transaction may be turned down – but wouldn’t you rather have that happen than pay a $39 fee? 

Beware of Costly Cash Advances. 

Cash Advances are a credit card company’s best friend.  It’s undeniably convenient to use those pre-printed checks that arrive in the mail, or to use your credit card to get cash at an ATM, but that convenience comes with a high price!  Not only are the interest rates on this borrowed money higher than those on purchases, but they start as soon as you get the money and can’t be avoided even if you pay your balance in full each month.  Furthermore, a one-time fee – typically 3% to 5% of the amount of the cash advance, with a $10 minimum -- is imposed at the time of the transaction. 

Don’t Buy What You Can’t Afford. 

If you’re having trouble making ends meet and find yourself using the “plastic safety net” to pay bills, you’re not alone.  Read these tips from the Consumer Federation of America for avoiding high cost loans.

In Trouble?  Get Help. 

If you do find yourself in serious trouble with credit card debt, do not delay.  Get help immediately.  Contact the Consumer Action Help Desk.

Last updated: February 18, 2010.