| Do you harbor a love-hate relationship with | | | | liable for the interest that accumulated |
| your credit card? | | | | since the time your billing cycle ended. |
| | | | |
| There are lots of reasons to love a credit | | | | * Different interest rates. Expect different |
| card, starting with the convenience and | | | | -- and changing -- interest rates depending |
| financial tracking that accompanies paying | | | | on whether you're making purchases, asking |
| with plastic. Don't forget the perks, like | | | | for a cash advance, or transferring a |
| cash and airline miles, which could help make | | | | balance. |
| your fantasies of a Hawaiian vacation a | | | | |
| reality. But there are also plenty of reasons | | | | * Penalty rates. Expect your interest rates |
| to feel less than enamored with that little | | | | to go up if you pay late or exceed your |
| piece of plastic. | | | | credit balance, in addition to paying a late |
| | | | fee. Also, expect that these penalty rates |
| Credit card practices have become a hot topic | | | | may apply to your outstanding balance, even |
| on Capitol Hill, and lawmakers this week | | | | if you charged those purchases when your |
| tried to shine a bright light on some of the | | | | interest rate was much lower. |
| policies they don't like. A panel of senators | | | | |
| called in executives from Citibank (NYSE: C), | | | | Teaser rates. Although the initial interest |
| Bank of America (NYSE: BAC), and JPMorgan | | | | rate charged by a new card might sound great, |
| Chase (NYSE: JPM) to explain some of their | | | | it might not last for long. Often, an |
| practices. | | | | introductory rate applies for only a short |
| | | | time, or only to a transferred balance. Make |
| Two of those companies, Citibank and Chase, | | | | a monthly payment even a day or two late, and |
| had recently announced some consumer-friendly | | | | your teaser could go away faster than you can |
| changes. Nevertheless, the lawmakers had a | | | | say "Charge it." |
| raft of complaints about the industry in | | | | |
| general, which make for a good reminder why | | | | * Payment allocation. Send a check to your |
| carrying credit card debt can get very | | | | credit card company, and odds are that your |
| expensive, very fast: | | | | low-interest balance will get precedence over |
| | | | any higher-interest purchases. Your |
| * Disappearing grace periods. If you pay your | | | | higher-interest balance will hang out there, |
| balance every month, you have a short time | | | | accumulating finance charges, while you work |
| before interest will be charged on your new | | | | through the lower-interest balances. |
| purchases. Not so if you're carrying credit | | | | |
| card debt month to month. In that case, new | | | | * Credit card fees. Expect to pay a fee if |
| purchases almost always start racking up | | | | you exceed your credit limit, even if the |
| interest costs immediately. | | | | credit card issuer approved the transaction. |
| | | | Also, expect to pay a fee if you think a |
| * Double billing. If your credit card uses | | | | mailed check won't get there in time, and you |
| double or two-cycle billing to figure the | | | | want to pay by telephone instead |
| balance subject to finance charges, be | | | | |
| prepared to pay more. When using double | | | | * Fees added to your balance. As the fees |
| billing, the credit card will use the two | | | | pile on, they'll be added to your monthly |
| prior months' worth of charges to determine | | | | balance, and they may accumulate interest |
| your balance, whether or not you carried a | | | | just like your outstanding debt. |
| balance the month before. | | | | |
| | | | * Confusing disclosures. Try reading your |
| * Trailing interest. This is interest that | | | | card agreement one day. You may not know what |
| accrues while your check's in the mail. Mail | | | | the agreement's talking about, but you'll |
| a check to your credit card to pay off a | | | | definitely know what those senators were |
| balance and, even if it gets to the credit | | | | talking about. |
| card company by the due date, you'll still be | | | | |