Managing Credit Card Problems

Having trouble keeping up with your credit cards these days? Our personal finance contributor has some tips to help you manage your plastic.

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ALEX CHADWICK, host:

Many economists seem to think that the credit crunch is on its way out. Still, a lot of people do carry big credit card bills from good times gone by, and with those bills come big fees.

MADELEINE BRAND, host:

Here to discuss how to reduce your credit card fees is Day to Day's personal finance contributor, Michelle Singletary. Hi, Michelle.

MICHELLE SINGLETARY: Hi, Madeleine.

BRAND: A lot of people are trapped in credit card debt. And I think some of the reasons for that is that they don't quite understand what's going on with the rules. There are different interest rates for different purchases, right?

SINGLETARY: That's right. You know, the thing is, people get these cards, and they don't read the fine print. But it's really important to know how to avoid the things that you can control, like paying late. The fees for paying late are just increasing year after year. But that's something that you can control by paying your bill on time.

BRAND: So you should look at your due date and make sure that your payment will actually get there by the due date?

SINGLETARY: That's right, because companies often change where you have to send your payment. That's one of the traps. Now whether they do that on purpose, I don't know. But the fact of the matter is, you need to look at your statement every month. Don't pull out an old bill, in an old envelope, and use that. Look at the current bill, with the current envelope, to make sure that the address is the same.

If you pay online like I do, you want to be sure that that address is correct as well. And also, be very careful about the due date. They will move the due date. So let's say you've got your bill set up online, and so you know your bills are typically due the 15th, but they've now moved it, and it's due the 10th. So every month, you want to check the address and the due date to make sure your payment arrives on time.

One other thing that people need to watch out for, the over-the-limit fee. Now, it's on average about $39. And you're charged it every single month that you are over that limit. That's something you absolutely control. And the other thing is, if you are paying your bill off every month, you're not even going over the limit. And you really ought not to be using more than 30 percent of your available credit. Because if you do, it hurts your credit score, and that ultimately can impact the interest rate your credit card company charges you.

BRAND: What can people do if they all of a sudden realize that they're being charged more in their interest rates from the credit card companies?

SINGLETARY: Oftentimes just a single phone call can say, I have been a good customer for X amount of years, I've never been late, or I'm rarely late, I've always paid my bills. A lot of times, they will reduce the rate. Sometimes they won't. But just let them know that you've been a good customer, and you think that this rate is unfair.

BRAND: You know, some people trying to outwit the credit card companies think it's a good idea to take advantage of these low or zero interest promotions, and use that promotion to pay off a higher rate credit card debt. Is that a good idea?

SINGLETARY: I do not think that's a good idea. I've had people ask me, I've got this zero percent credit card offer. I'm going to use that to pay off my car note, or my student loan debt. And I tell them, you know what, there is no such thing as a fixed-rate credit card. The companies only have to give you 15 days' notice to change that rate.

So now you've taken a fixed-rate debt, like your car loan, and put it on a credit card. Something happens, that rate goes to 20 or 30 percent. And a car loan that you had for 6 percent is now 30 percent. It is not a wise decision because the terms of your credit card deal can change at any time.

BRAND: Michelle Singletary is Day to Day's personal finance contributor, and she writes the Color of Money column in the Washington Post. Michelle, thank you.

SINGLETARY: You're welcome.

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