Tips from Consumers Union's Experts: What you don't know can cost you!

• Pay more than the minimum payment; otherwise you will be paying off your debt for a very long time. Click here to estimate how long it will take you to pay off your credit card balance.
• Read your credit card mail immediately! Issuers are required to send you notice 45 days before making changes (like raising your APR on future purchases) but can start charging that new rate on purchases made 14 days after the notice.
• Don’t use cash advances you’ll pay a fee of 3% of the amount you borrow, plus interest on the balance.
• Write to your bank and ask it to stop sending you credit card convenience checks. These are an easy way for an identity thief to access your account.
• Don’t sign up for overlimit fees! Banks can’t charge you for going over your limit unless you opt-in.
• If possible, try to find a credit card with no annual fee. Shop around.
• If your rate goes up because you paid 60 days late, try your hardest to make the next 6 minimum payments on time. If you do, the issuer has to give you back your old rate!

Top Credit Card Traps
Even with protections from the Credit CARD Act, consumers will continue to be bombarded with creative credit card practices that attempt to get around the new law.

We have identified these tricks credit card companies will continue to use to trap consumers into undesirable terms and overwhelming penalties and fees. Issuers are also inventing new tricky practices and we want to know what they are. Click here to tell us about new tricks you’ve encountered.

1. Universal default still exists

   After the first year your account is open, card companies can raise your rate any time for any reason. Some credit card companies monitor your credit report under a universal default clause, looking for behavior with other creditors. If they believe that your behavior with other creditors signals that you’re a greater credit risk, the company kicks up your interest rate.

   They have to give you 45 days notice before they apply a new rate, but can apply the rate to all purchases made 14 days after the notice is sent out. So if the rate is too high, STOP using your card soon after you get the notice and find a card with a lower interest rate.

2. No notice required

   Though issuers are required to notify you at least 45 days before making many significant changes to your account, there are two important exceptions to this rule. An issuer can still close your account or lower your limit without giving you notice. If that happens, give the company a call and ask for an explanation. These changes can have an affect on your credit score, so the best thing to do if this happens is pay down your balances on the affected card as well as other forms of credit as quickly as possible.

3. Minimum payment requirements are still low

   Making only the minimum payment can keep you in debt for a very long time. For example, if a consumer made the minimum payment on a $1,000 credit card balance at 15% APR, it would take 8 years and 10 months and cost $1,729.19 to pay off the balance. A consumer who owed $5,000 would end up paying $10, 729.18 over 22 years and 2 months if they made the minimum payment.

4. Variable rate cards

   Variable rates are ubiquitous now—most all consumers are now subject to the ups and downs of an index. Indexes are generally low today, but will likely go up in the future and when they do, these increases can be applied to existing balances under an exception to the “no retroactive rate increases” provision of the law.

5. Deferred interest plans

   Next time you want to buy that flat screen TV beware of the deferred interest enticements offered by the retailer. These are the promotions that advertise zero interest purchases, IF the consumer abides by ALL the terms and conditions, including paying off the whole purchase in a certain period of time and not missing any payments. Though the promotions advertise, no interest, if you don’t pay it off in time you can be charged interest all the way back to the time of the purchase.



6. Cash advance/convenience checks

   The interest rates for cash advances and convenience checks are even higher than the rate for purchases on your credit card.

7. Fees, fee and more fees

   There are no restrictions on the types of fees that card companies can charge. Issuers have been coming up with all kinds of new fees, including dormancy fees, fees to receive a paper statement and annual fees. This is another reason why even consumers who do not carry a balance (and therefore are less concerned about an increased APR) need to read everything that comes in the mail from their card company. If your company starts charging you a $100/year to use their card you may want to shop around before being surprised by a new charge.