Watching Out for the Pitfalls of Credit Card Debt

10 ways to avoid the traps associated with credit cards

1. Late Fees. There is more profit to be had from when late fees go into effect. Credit card companies have doubled their late fees over the last 12 years. There is less time to pay a bill once it is mailed to you and many companies do not have a leniency period, allowing time after the due date before you are charged a late fee.
2. Keep Within Your Limit. There are many credit card companies that will charge consumers a fee who exceed their limit even by $1.00. If necessary, contact you credit card company and try to work out a way to get your limit increased instead of going over.
3. Watch Out for Transaction Fees. Credit card companies will often charge the consumer with fees for receiving cash advanced, transferring a balance, or purchasing lottery tickets considered quasi-cash. In the fine print of your statement, credit card companies will state that they are allowed to charge a minimum transaction fee.
4. Annual Percentage Rate Increased. When you have been late on a payment or missed a payment, your annual percentage rate (APR) will increase to a penalty APR. It is 4.5% higher on average than the regular APR.
5. Grace Periods are Gone. There is a time when a transaction has 30 days until interest accrues on the charge. Now, many credit card companies only average 23 days and then add interest and some have no grace periods at all.
6. Low Introductory APRs. Over half of the credit card offers will advertise a low introductory annual percentage rate (APR). The rate on average was 4.13 % and lasted about 6 months. This sounds great when you first sign up, but this is masked by the sharp rate increase that comes after the introductory period. They are on average a 264% higher rate and are not notably disclosed to you the consumer.
7. Low Minimum Monthly Payments. These payment are very attractive to consumers and are very low with 2% to 3% of your total amount. Because of the low monthly payment, cardholders are charged more in finance charges.
8. APR that is Fixed. Even though you may have a fixed APR, credit card companies can raise their rates and only give you up to 15 days notice. This may catch you off guard as you may not always read your fine print on the letters they send you.
9. Premium to Lower-Grade. When you are offered a premium credit card through direct mail, you may get the substitute lower-grade card if you don't qualify for the premium. They will bait you in and then switch your card. Read the fine print on the application that gives the warning that the company may substitute you to a lower-grade card. It usually costs more or offers less and may not mention this in the initial disclosure.
10. Unknown APR. Credit card companies will quote you a wide-range of APR's that may be available to you. Once you are issued the credit card, then the company will assign you an APR based on your credit history. You are denied the knowledge of you terms until you are accepted, therefore, receiving an APR you are not willing to have.