While credit cards can be very useful financial tools, they come with a few potential pitfalls to beware of, usually in the form of rates and fees. In terms of fees, the two most common fees to be aware of are the annual fee and the balance transfer fee. These can sometimes be quite high and you should make sure you know what they are before you sign up for a credit card or perform a balance transfer.
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All credit cards have rates, but some are higher than others are. A decent credit card rate nowadays would be around 15.5% or less, so if you have good credit you should not have to pay more than that if you shop around. Some credit card rates are low introductory rates, and in the case of an introductory rate, you need to be aware of the fact that the introductory period will eventually expire and the card will revert to its higher normal rate.
Shop Around For the Best Rates and Fees
Shopping around for the best credit card rates and fees has become much easier with the creation and development of the Internet. Whereas in the past someone would have had to compare brochures and call around to various credit card companies or banks, now it’s just a matter of doing a Google search or going to a favorite credit card comparison website.
You might occasionally get a credit card offer in the mail or see an ad for one on television, too.
When comparing credit card rates, you’ll want to make sure that you are comparing real rates to real rates and introductory rates to introductory rates. You’ll also want to be sure of what is more important to you—a great rate or no fees. For example, if you always pay your full credit card balance each month, the rate would be irrelevant while you would want the lowest fees possible. If you regularly carry a large balance, the rate would be more important than the fees.
Your Credit Rating Affects Your Credit Card Rate
The rates you see quoted in credit cards ads or on comparison websites are usually the rates available for people with perfect or near-perfect credit. If you have been late on credit card payments or missed a payment on a credit card or loan, your credit will not be perfect and it will likely not even be near perfect. This means that the rate you qualify for may be considerably higher than the rates you see quoted.
Credit Card Rates Can Change
Some credit card rates are based on variable rates, such as the Federal Prime Lending Rate. As that base rate changes, the credit card rate will change with it. Even credit card rates that are not based on another rate may be raised or lowered at any time for a variety of reasons.
Current laws, as listed on the website of the Board of Governors of the Federal Reserve System, require that a credit card company provide you with 45 days of notice if they increase your rate, change your fees, or make other significant changes to your account. This was part of legislation that was passed on February 22, 2010 to help protect consumers from questionable credit practices.
When Your Credit Card Rate Increases
According to an article on About.com, there are a few options for how to handle it when a credit card company raises your rates. The obvious option is to just stop using the card. If you do that, you might still not want to close the account, however, as closing the account and reducing the amount of available credit you have might lower your credit rating.
No matter what your ultimate solution is, you might want to start by paying off your balance, so you don’t have to pay the new interest rate.
If you don’t have the available funds to do this, you may be able to transfer the balance to a card that has a lower interest rate. Another good thing to try would be negotiating with your credit card company, if you have a good history with them, they may be willing to give you back your lower rate rather than risk losing you to another credit card company.
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