At The Zolman Law, Arizona’s premier bankruptcy law firm, we really do care about you and your family’s financial health. In this series of blogs, we will cover some tips for avoiding or reversing the crushing credit card debt that can lead many people to declaring chapter 7 or chapter 13 bankruptcy.

Credit card fees

Credit card companies make money by charging you interest and fees. And even though competition is tight in the industry, fees charged to consumers have never been higher.
Fees in particular are a way for credit card companies to hike up their profits. While consumers may shop around on interest rates, most don’t open an account thinking they will miss a payment or go over their limit. But the average late fee has nearly tripled in the last fifteen years, and now stands at almost $35. And you get zapped even if you simply forget and mail your payment one day late.
Cash advance fees have also crept up over the years, with the average rate now at 3% with no maximum upper limit and no grace period. Lenders are tightening up on grace periods for interest charges and late fees across the board.
How to protect yourself

  • Set up some sort of automatic payment that covers at least your minimum payment each month
  • Keep an eye on balances to ensure you don’t go over the limit
  • If you do get charged a fee, call the card issuer right away and ask them to remove the fee and any punitive interest rate. Be polite and make your case, like “I have been a cardholder for five years and never missed a payment.” If that fails, threaten to close the account.
  • Do not use your credit card to get cash. It is a very bad deal.

Excuses to raise your rates

One of the latest tactics credit card companies are employing to get more money out of consumers is keeping an eye on your other credit accounts. Credit card companies have written into the small print of your contract that they can charge penalties and increase interest on your account with them if you miss a payment, go over your credit limit or open an additional account with another provider. Some providers will actually hike up your rate if you make only the minimum payment every month.
How to protect yourself

  • Be very careful to pay ALL of your bills on time, not max out any credit cards, or apply for new credit unless it’s absolutely necessary.
  • Pay more than the minimum due. Paying even a few dollars more than expected can keep your rate from jumping and help you pay the debt off faster so you pay less interest.
  • Keep an eye on your credit report. Get your free copy once a year and dispute any information that is incorrect.

Offers that are too good to be true

While 0% interest offers from credit card companies are extremely rare these days, card issuers are sending out tempting offers for customers looking to lower their interest rates. But watch out for these common tricks:
Low rates on balance transfers: The low interest rate applies only to your balance transfer; if you make charges on the card they will be at a higher interest rate, AND any payments you make go toward paying off the lower interest transfer first.
Caps on balance transfer fees: Balance transfer fees have typically been a percentage of the amount transferred – with a cap on the amount, but some providers have eliminated the cap, making that low interest rate less worth it.
Not giving the promised offer: Even if you get a letter saying you’re approved for a low-interest credit card, the issuer may approve you at a higher rate.
How to protect yourself

  • Always read the fine print. Look for language that addresses when the teaser rate goes up and whether the company can approve you for a card at a higher interest rate than the one promised in the large print.
  • Look for the balance transfer fee and make sure it is still worth your while to transfer.
  • If you do get a new card and transfer a balance to it, pay off the balance transfer before making new purchases on the card.

Making charges in other countries

Many years ago, using your credit card when visiting another country was a smart move that paid off with a favorable exchange rate. But these days, almost all cards add on an additional 3% to the transaction – and that can add up. Some of the cards that are still a good deal (as of this writing) include:
Capital One: 0%
Providian: 1%
American Express: 2%
HSBC: 1-3% (depending on the card)
How to protect yourself

  • Make sure you read your card agreement or call the issuer before the trip starts to find out what the rate will be.
  • When you’re in-country, check to see if the rate you get from your credit card is still lower than that available at the money exchange kiosk.

It’s also a good idea to photocopy the front and backs of the cards you will be travelling with and keep the copies in a safe place in case the cards are lost or stolen.
At The Zolman Law, we believe that your life shouldn’t be defined by debt. We have helped hundreds of people just like you find the relief they deserve from harassing bill collectors, paycheck garnishment, foreclosures proceedings, and – most importantly – the constant worry about money and what to do about your debts.
Need help? Contact our bankruptcy law firm in AZ today and receive a free consultation from compassionate debt relief professionals.