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Did You Know...

For the sake of keeping your business, some credit card companies will reduce your rate if you simply ask them to.



Be Smart When It Comes to Credit

When out in the stores or surfing the web, many of us automatically reach for the plastic when it comes time to make the purchase.

However, analysts are cautiously urging Americans to be more credit smart. Revolving credit card debt is now at a record $569 billion, with the average card holder holding an average $7,000 of credit card debt. Now more than ever, maintaining a good credit history is critical to good financial health.

Credit card companies have been flooding consumers with almost too-good-to-be-true credit offers. In fact, according to the Consumer Federation of America, 3.5 billion credit card mailings were sent out to homes across the country in 1998.

Offers for new cards are also coming into electronic mailboxes. Many of these companies are touting extremely low interest rates with no annual fee. Certain platinum cards are even promoting limits higher than most home values.

Transferring your existing card balance to one of these low interest cards can be an excellent way to save money. A cardholder with an average revolving debt of $5,000 on a 14.9% card pays roughly $745 in interest charges every year. By rolling that balance to a new card charging only 2.9%, you might save $600 a year in interest charges alone.

Here's the caveat: many of these low interest offers are designed specifically for card holders with good or excellent credit histories. If you've been late on a couple of payments in the past year, you may be approved for a credit card, but then discover that it has a higher rate than you originally thought. In some cases, you may not be approved for the card at all.

Don't Skip the Details

It's more important than ever for consumers applying for credit to read the fine print on the credit card offers. Some people with a couple of dings on their credit history may see their actual rate is much higher than they originally thought.

Once you have the card, you should note all fees attached with it. Credit card companies subsidize those low interest rates with higher one-time charges, such as late fees and overlimit fees.

Not surprisingly, those charges have steadily become more and more expensive. In fact, since 1994, the average late fee has more than doubled to $24.02, and the average overlimit fee has jumped by 187%.

The fine print will also reveal any additional fees that you may incur by using a card. Some card companies have begun charging a fee for certain types of customer service. Others even impose a cost if you decide to close your account prematurely.

There are some great offers out there. However, paying attention to the details will ensure you're getting a fair deal, and not paying too much for the convenience of a credit card.

Costs Keep Rising

There are several factors that have been pushing up the cost of credit for American consumers. Banks and institutions are under increasing pressure to turn a profit. This pressure is coming primarily from shareholders, unsatisfied with low returns from credit card divisions.

At the same time, analysts note that losses from these operations have gone up. The credit card industry estimates that debtors write off $40 billion every year in credit card debt. Bankruptcies are on the rise, due in part to many people applying for all these credit card offers, and then getting in over their head.

Needless to say, credit card companies are getting a little pickier about who they extend credit to, and how much they charge. However, their focus on the bottom line does not mean you can't save money by being a credit-conscious consumer.


Next - Part 2




Don't Skip the Details
Costs Keep Rising
What You Should Look For
Rebuilding Your Credit
Better Call Security
Good Credit Means Savings




National Revolving Credit Debt
$216 Billion
$242 Billion
$266 Billion
$283 Billion
$315 Billion
$378 Billion
$454 Billion
$509 Billion
$535 Billion
$569 Billion

Source: Federal Reserve







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Consumer Federation of America



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