Nevada County Picayune and Gurdon Times Newspaper Archive

Credit Card Debt Adds Up Fast

by Barbara A. Holt, Ph.D.

Clark County Extension Agent --

Family and Consumer Sciences

Cooperative Extension Service

Credit cards are a way of life for many Americans -- we have 460 million of them. We owe an average balance of $1,828 per card, and $3,019 per family.

Consumers may not realize haw the cost of credit cards can add up, says Wanda Shelby, district family resource management specialist of the Cooperative Extension Service, University of Arkansas.

Today's consumers are paying rates as high as they were in the early 1980's. In spite of competition, credit card interest rates have not fallen. Wise consumers will read, and heed, the fine and no-so-fine print when selecting, using, and transferring balances to lower rate cards.

Because of the nearly saturated market for credit cards, competition has become fierce. Issuers lure customers away from their current credit cards by offering "checks" to pay off what is owed and shift the balance to a new card.

Before transferring your credit card balance to a card with a lower interest rate, be selective. Such "surfing" can save money by transferring interest rates in the 12 to 20 percent range to the 6 to 9 percent range.

But read the fine print and determine what the actual rate is, what it applies to, how long the lower rate will last, and how much the rate may increase.

Transfer costs may be high. Some transfer offers apply to a rate that expires on a certain date. The longer you wait, the less appealing the offer becomes, especially if it may take six to eight weeks to transfer a balance.

Watch the grace periods. Cards now may not have any grace period and begin charging interest as soon as a purchase is done.

If your credit card offers two-cycle billing, you must pay off your balance for at least two consecutive months to avoid interest charges. If you pay off your balance in February, but not March, the grace period you earned in February will be eliminated and you will be charged interest for both months.

Penalties are increasing. The average late payment fee recently was $12.81, while the average over the limit fee was $13.02. Some credit card issuers charge as much as $18 if you are late with a payment, or go over your credit limit. This amount equals a month's prime-rate interest on $2,500 balance.

Watch pre-approved offers. They may not contain important details that are in the final agreement. Do not sign any pre-approved affer without thoroughly reading all regulations.

Some credit cards increase the rate on the balane if you are late with payments or go over the limit. Others may increase your rate if you incur too much debt with other companies. This is done on a case by case basis, and may be done on very short notice.

What can a consumer do about high credit card rates?

Good customers, those who carry balances, use their cards regularly and have spotless credit records, may be offered lower rates. If this applies to you, you may want to contact your present credit card issuer and ask if a lower rate is available.

Become a savvy credit consumber. Pay off your charge card debt every month. Shop around for a credit card. Read the fine print, and you can save money.

Learn more about credit and its cost at the Clark County Extension office, 423 Clay Street in Arkadelphia.