Tips to Navigate the Maze of American Plastic

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As the number of credit cards rise in the United States, it is still possible to be a savvy credit-card consumer. Curtis Arnold is the founder of cardratings.com, a consumer advocacy site focusing on the credit card industry.

MICHELE NORRIS, host:

Curtis Arnold is the founder of CardRatings.com, that's an advocacy site focusing on the credit card industry. He's with us to talk about what consumers can do to stay out of the kind of credit trouble Congress heard about today. Mr. Arnold, welcome to the program.

Mr. CURTIS ARNOLD (Founder, CardRatings.com): Thank you, so glad to be here.

NORRIS: Now, I imagine the best way to avoid this problem in the first place is to just pay your bills in a timely manner, but if someone does fall behind, how can customers avoid these big problems?

Mr. ARNOLD: Invariably, even the most conscientious consumers are going to make a late payment once in a while. And if you do, the thing I would suggest that you do is you call your card company and just tell them that, you know, I've been a good customer, I've got a good credit score, and I'd like to have that -and in often cases you're charged - dinged - 39 bucks for late payment - and just ask that be reversed. Sometimes a simple courteous phone call will do the trick.

But what you have to be more cognizant of is the potential for that late payment, not just the fee, but the detrimental effect it can have on your interest rate. Because typically a card issuer, if you're late one day, will put you into default or penalty pricing. And that means that your interest rate - let's say you've got an interest rate of 10 percent, which is a good rate -suddenly overnight could skyrocket as high as 32-plus percent.

NORRIS: Now, there are people in Congress that are calling for changes in this practice - this is something that needs to end. But if you've already run afoul of this, and all of your credit card rates have skyrocketed, what can you do - if anything - to bring them back down?

Mr. ARNOLD: Well, the good news is that if your credit is good - and I'm talking specifically about your credit score. So if your credit score is good and you are paying interest rates above 15 percent - which is about the average interest rate currently for platinum credit cards - if you're paying a rate above that - say you're paying 25-30 percent. Then you should contact your issuer and say, why am I paying such a high rate?

They - if the customer service rep that answers the phone cannot help you, ask to speak to a manager. Typically, the manager can make concessions. If the manager can't, then threaten to close off that account. And they will typically transfer you to an account retention department, whose sole purpose is to keep you as a happy customer. They don't want to lose you. It costs them up to 200 bucks to acquire a new customer to replace you.

If they don't budge at that point, and they usually do, but if they don't, then - if you've got a good credit score, go - be proactive as a consumer and be savvy and educated.

NORRIS: The Consumer Federation of America today described these practices as traps and tricks. And even though they're legal, is this what they essentially are, a way for the credit card companies to pump up their profits, especially if people don't pay their bills on time?

Mr. ARNOLD: It's definitely an initiative by the credit card industry to boost their bottom line, to keep their stockholders happy. And the credit industry has become more and more fee dependent. And so they're looking at creative ways that they can slap you with up to $39 late fees, up to $39 over-limit fees. And it, you know, it is a form of a trap, because they are not going to go out of their way to help you avoid these fees.

As consumers, we need to be cognizant of this type of fees, and at all cost try to avoid the fees - no pun intended.

NORRIS: Mr. Arnold, thank you very much.

Mr. ARNOLD: My pleasure.

NORRIS: Curtis Arnold is the founder of CardRatings.com, an advocacy site that focuses on the credit card industry.

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