The best thing you can do, say the Dolans, is to pay attention to your credit card bill. Specific items on the bill can alert you to changes in the credit card agreement, like interest rates and late charges. Credit card companies are required to let you know, but the message is not always clear.
Can credit card companies just change rates and fees any time they want to?
Basically, they can. They need to notify you. But that's usually just a notation in your bill the month before the changes take place, maybe 15 to 30 days notice. If you use the card or pay the bill after the change, it means you've accepted the terms. So keep an eye out for them, because the fees have been rising fast. One survey found late fees have increased almost 75 percent since 1995.
What are some "red flags" to look out for?
- The name of the bank on the statement. Last year, 32 million credit card accounts were sold by one bank to another, and you can get some real surprises when your account has been sold to some far-away bank. For instance, you may find the interest rate on purchases and cash advances can be dramatically increased. The only thing a new bank has to keep is the low "teaser" rate the old bank offered. But after that expires, it can charge anything it wants to.
- A message right on the face of your statement.
People often don't read these messages because they are usually pushing something the card company wants you to buy. But sometimes they have real information, like one that says to look for an insert in your bill to find some changes.
- Also, obviously, look at the interest rate. If your card company is changing, so may the interest rate. But even people whose credit card company stays the same should beware. They sometimes jack up your interest rate if you've been late a couple of times with payments or have exceeded your credit limit.
- Late fees, imposed when you pay your bill after the due date, have really gone up in the last few years. One survey found they've risen from about $13 to $22 on average in the last three years, up to $29. And few companies are being lenient about it anymore. Even if your bill is only a day or two late, the companies will charge you. So look for "late fees" on your bill.
- And look at your "credit limit," another place where you can get penalized. Ten years ago, companies didn't charge you if you went over your credit limit as long as you paid it back. Now they charge on average about $21 plus finance charges until the amount on your bill drops below te limit. So watch that.
- Look at the "due date" on your bill.
There is typically a 25- to 30-day grace period between the closing date on your statement and the date your payment needs to arrive. That has been dropping to 20-25 days, which, if you were away for a long weekend or something, may only give you a few days to pay before the late fee kicks in.
- Also, look at the minimum payment.
Many banks are now having you pay 2 percent of your outstanding balance instead of 4 percent. That means you pay less, but it will take years longer to pay off the balance and cost you a lot more to boot.
- Often a phone call to protest will get the fee removed the first time, and it helps to have a good credit record. But if you feel you were unfairly charged because the changes were in small print or tucked away with the promotional items in your bill, you should look for a better offer. Most people's mailboxes are stuffed with credit card offers. and there are some good Web sites. Check them out.
Bottom line: Pay attention to your bill. Don't be too busy to be ripped off.
To compare credit cards and interest rates, visit bankrate.com.
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