Dunnan on Dollars

  Personal Finance Tips from Nancy Dunnan

Credit Card Fall-Out
Higher Rates and Fees

February 8, 2008 - Unless you've been vacationing under a rock, you know what the subprime mortgage situation has done to many of the financial stocks.

But now there's a new, related happening brought about because many of the nation's banks are facing significant losses because of delinquencies - primarily mortgage delinquencies but also delinquencies on automobile, truck and personal loans.

So it should come as no surprise that banks are trying to cushion these losses by hitting the consumer. They are raising credit card fees -- late fees, ATM fees, this fee, that fee. They are also increasing interest rates on unpaid balances and on cash advances.

Keep in mind that credit card issuers can change interest rates at any time. They do not need government permission to do so.

Some are even slapping on penalty rates if you make late payments to another creditor! What's the connection here? Many lenders re-set rates based on an individual consumer's credit score.

Another means banks are using to boost their cash flow is to charge fees for transferring balances from other cards. Some are even shortening the so-called "grace period." That's the time frame during which you can pay your credit card bill without incurring interest charges. Typically, it has been 30 days, but in some cases it's recently been squeezed down to just 25 days.

Protective Tips

Don't stay under a rock. Be aware of these changes and protect yourself.

(1) Pay on time. Know when your credit card bill is due. If paying by mail, get to the post office early, allowing for delivery delays.

If you can't pay the full amount due, at least make the minimum payment - again, on time.

(2) Negotiate. If you have a good credit history, by all means use it. Call your current credit card company; let them know you are thinking of leaving. They may take action to keep you as a loyal customer who pays bills on time. In this era of mounting deliquent accounts, you'll look very good!

(3) Shop around. Next, check various credit card interest rates and fees at http://www.bankrate.com/ and http://www.lowcards.com/.

(4) Read the fine print. Credit card issuers notify consumers about most fee and rate changes. However, they tend to do so in very small size print. Pay attention to the notices that arrive with your monthly statement and if you're uncertain about any fee or rate, call customer service.

- Nancy Dunnan

RECENT COLUMNS by Nancy Dunnan
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New 401(k) Rules for 2008
The Debt Set - Fixing that Holiday Blowout
Tapping Your 401(k)

If you want to suggest a column topic for Nancy, drop her a line.

Like what Nancy has to say? you might be interested in the new edition of her book:
How To Invest $50 To $5,000: The Small Investor's Step By Step Plan for Low-Risk, High-Value Investing