Paying credit card bills on time may not be enough

Posted on December 23, 2007
Filed Under Credit Card News, rates | Leave a Comment

Friday night Joella Powers and her mother Carol Taylor were at Britton Plaza on Dale Mabry trying to get more Christmas shopping done. Powers says “I probably have five more people to buy for.” Joella says one thing is for sure she will not buy with credit cards this year. She prefers her debit card. “Because the credit, I’m scared they’re going to get me later.”

She’s not alone either. Godelieve Benko was out shopping with her family and says she feels the same way. “The interest rates, they’re pretty high on a credit card especially when you don’t pay it off at the end of the month so I just use cash. I prefer cash.”

A financial counselor from Eagle Christian Counseling in Tampa says the two shoppers have the right idea. Doctor R.K. Alexander says if you have a credit card with a high interest rate stop using it immediately.

But some consumers are finding it harder and harder to get out of debt because their interest rate has changed drastically and they may not have noticed it. It is such a serious trend that Congress is looking into it.

Imagine you have an interest rate of 8 percent on a bank credit card and you pay on time for years. At some point you open two credit card accounts at different stores and all of a sudden your automated FICO score drops and so your bank card issuer automatically hikes your rate 23 percent.

Doctor Alexander, says “There’s no way you can get ahead on that. It’s just absurd.”

Alexander offers some tips.

1) She says be vigilant. Know what your interest rate is and make sure you examine your billing statement carefully.

2) Call the credit card company immediately when you find changes on your statement.

3) Make a plan for your spending. Write a check, use your debit card or spend cash instead of using a credit card.

Alexander says we really only need one or two credit cards in the first place. “One will buy as much as a lot will or else you are over extending yourself and that’s never a good idea.”

Earlier this month a Senate panel listened to testimony from both consumers and credit card companies on the issue. Citigroup and JP Morgan Chase have said they will stop the practice while Capital One says it doesn’t do it.

Meanwhile some in the banking industry are opposed to any changes.

by Tammie Fields

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