If Your Credit Card Could Talk

OfficePro

Have you looked at the back of your credit card statements lately? That sea of small print detailing items like APR, daily periodic rate(s), and accruing finance charges? If so-and if you were still awake after struggling through five or six paragraphs of legaleseyou may have noticed some changes.

Higher rates, of course, are among the changes. But the card issuers have found other, more subtle, ways of increasing your credit card bill. Some fees are "hidden"; you won't find them detailed in your agreement. And many now offer "rewards" in the form of airline tickets or other goodies-and raise fees at the same time. Because the average American household now holds an average of 13.5 credit cards with a debt level of more than $9,200, even small changes in credit card charges can have a big impact on your budget.

Office professionals have an additional interest in credit card changes, because many are responsible for handling their organization's corporate credit cards. At Fort Wayne Pools Inc., for example, Paula Clifford manages the credit cards for four of the company's execs who use the cards mainly for travel, while an admin uses a card for office supplies.

"We track the charges carefully," says Clifford, controller of the Fort Wayne, Indiana-based manufacturing company. "We pay the monthly bills almost immediately to avoid interest charges."

If your credit cards could talk, here's what they might tell you:

1 "Maybe you haven't noticed that we've shortened the time when your payment is due." Many credit card companies have quietly reduced the date that you must pay your bill from 30 or 31 days to 25 or even 20 days. But the number of days you have to pay the bill may be even shorter. For example, your card statement may say that you have "25 days from the statement date, provided your previous balance is paid in full by the due date." Bear in mind that the "statement date" is not the date on which you receive the bill; it's the date on which the credit card company made out the statement. That may be one or two weeks before you even receive the hill.

Many credit cards do spell out a specific date when your payment is due. It's worth getting your payment in the mail at least four or five husincss days before the due date, to avoid a "late fee." Another option is to pay your bill online.

2 "Too bad you were late with that payment-maybe you didn't notice we've also bumped up our fees for being late." late payment fees now range from $1.9 to $45, with the average around $25. This can be a pretty stiff penalty-in terms of percentages-if your payment is small. In a way, late fees serve up a "double whammy." If your payment arrives after the grace period, you may be charged both a finance charge (the interest on the outstanding balance) and a late-payment charge.

And that's not all. If you're late several times, you may get hit with a "penalty rate." For example, if you make two late payments within six months, a card issuer may have a policy of raising your interest rate. If that happens, it may be time to switch to a different credit card.

3 "Good news! We've decided to give you rewards, just for using our card. We're giving you airline tickets, magazine subscriptions, hotel rooms, gasoline, golf clubs-all kinds of great stuff. Oh, and we meant to tell you, we've found ways to get you to pay for the rewards." More than four out of 10 cards are now tied to some kind of reward. In the typical arrangement, every dollar charged on the account earns points redeemable for merchandise or services. For example, the "MilesOne" card issued by Capital One bank offers air travel miles (among other "rewards") based on card use. If you want to spend $200 on an airline ticket, it would "cost" 16,000 miles. (You get one mile of credit for every dollar charged on your credit card.)

If you're among the roughly two-thirds of card holders who carry a balance each month, rewards typically aren't worth the price you pay in the form of higher interest rates. The rates tend to be five percentage points higher than non-reward cards. A typical low-rate card might charge 4 percent or 5 percent, compared with about 9 percent for reward cards, with some charging as much as 19 percent.

If you pay off your balance every month, the interest rate won't matter to you. In that case, though, look at the annual fee you may be paying. Some cards charge as much as $50 in annual fees for rewards. (You can find a list of low-rate and reward cards at www.CardWeb.com.)

4 "Hate to tell you this, but if you are a good complainer, you can often lower your credit card costs." The fine print on the back of a credit card statement makes it sound as if the various fees are cast in stone. The fact is, if you feel you are being unfairly treated, the credit card issuer can be flexible.

Compare your credit card fees with those of other card issuers. You can find listings of credit card plans on the Internet, in personal finance magazines, and in newspapers. If you feel your interest rate is too high, don't hesitate to tell the credit card company you want a change in rates. If the card company doesn't want to negotiate a better rate, toss in the idea that you might take your business elsewhere. The credit card business is highly competitive, and it costs the companies a lot to find new customers, so they will usually try to find some way to keep von satisfied.

You should also use your complaining skills to deal with special charges. If you're late for a second time in getting your monthly payment to the bank, for example, and the bank wants to impose a late charge, don't hesitate to point out that you are a good customer and you'd like them to drop the second charge.

5 "Sounds crazy, but some of us are charging you a fee if you don't carry a balance on your credit card." It's true. One example is the Wells Fargo Prime Rate Card, which charges a $2 minimum fee for paying off your credit card balance in full. The justification for the charge is that making the credit available to the cardholder is an expense the bank needs to recover.

So-called "disposable cards" may also charge a fee for nonuse. Most disposable cards expire within one or two years, although some may expire in six months. The cards have a "stored value." If you do not use all of the stored value and ask for a check to close the account, you may be charged a "closure fee."

6 "We don't advertise it a lot, but if you fall behind in your credit card payments, we might agree to re-age your account." If you've fallen seriously behind in your credit card payments, you might consider "re-aging" your account-in effect, starting over from scratch.

Let's assume you're three months late. If the card issuer agrees to re-age your account, those three months are wiped out. Missed payments are forgiven, and late fees stop. You still owe the same amount, but you are no longer considered a bad person. (The official designation is "delinquent.")

Card issuers must follow certain rules before they can agree to re-aging. The main rules are (1) the cardholder should demonstrate a renewed willingness and ability to pay; (2) the credit card account should be at least nine months old; (3) the borrower should have made at least three consecutive minimum monthly payments or the equivalent sum.

You need to consider your financial situation very carefully before you request re-aging. If you can't make the payments, you'll soon be back in the hole again. It would be better to arrange a payoff schedule with the card issuer-one that you can afford.

7 "We really don't care too much if you go over your credit limit- that's when we really pile on the fees." Not only do you face a charge for going over your credit limit, but-surprise!-the charges have been increasing. Fees for going over the top now average about $20. If you think you might be going over the limit a second time, get in touch with the credit card company and ask for an increase in the limit.

8 "When you travel abroad, using your credit card will get you the best exchange rate, but some cards will then charge you for transactions overseas." The fees in some cases are substantial. Some credit cards end up charging unaware travelers up to 7 percent for transactions overseas.

There are wide differences among credit cards when it comes to making purchases overseas. If you have a credit union card associated with Visa or MasterCard, the charge might be only one percent. However, other major credit card issuers may issue a 2 percent foreign transaction fee for normal purchases. If the card is used to get cash while traveling, fees up to 4 percent might be added. Before deciding which credit card to use on your trip abroad, take a close look at the fine print in your credit card agreement.

9 "Worried that someone could swipe your card number when you make online purchases? If so, consider getting a temporary card number." Online shopping has increased considerably over the past few years, but many shoppers worry about the possibility of identity thieves gaining access to card numbers. To ease such fears, companies have developed a smart answer-temporary or disposable credit card transaction numbers.

In the usual arrangement, the credit card company issues a new, temporary number that you use to make purchases, then the number expires. Not all credit card companies offer this service, and those that do, offer different features. Discove\r Card, for example, offers the "Desktop Virtual Credit Card," which lets the customer purchase several items from the same online store. Citibank offers a "Virtual Account Numbers Program," which provides the customer with a substitute number, which takes the place of their real number, each time they make a purchase.

10 "We think you should use our card exclusively. But the fact is, if you have several cards, you can put some pressure on us to change our rates." Scott Bilker, author of Talk Your Way Out of Credit Card Debt and quite possibly the owner of more credit cards than anyone alive (he recently surfaced in the pages of Money magazine to disclose he has 80 different cards), believes holding multiple cards is a smart strategy. He and his wife use just one of the cards for two weeks. Then they switch to a new card. When the first bank sees no activity on their card, they often get in touch with Bilker with a new, sweet offer, like zero-percent, no-fee balance transfers.

Bilker once took out $62,000 in cash advances at zero percent interest, invested it all in a money market account paying almost 3 percent, and made an $1,800 profit in 12 months. We think even the credit card companies were impressed.

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