Credit Card Debt Management

Yesterday’s news from Capitol Hill has my heart all aflutter. It seems there has been a fresh wave of aggressive talk toward credit card companies.

Members of Congress, specifically Rep. Carolyn Maloney (D-NY), are once again turning a watchful eye on the credit card industry, Reuters news service reports. Maloney and others met with credit card companies and industry watchdogs for about two hours Monday to discuss best practices and consumer affairs.

A Washington Post article from late May stated that the Federal Reserve, like Maloney, was calling for full disclosure of credit card terms and agreements, spelled out in clear, easily understandable language.

But wait! What about jacking up my credit card interest rate because I misplaced the electric bill one month?

Experiences like mine are simply not fair!

“Congress needs to do more than require that unfair credit card practices be disclosed — it needs to end them,” Sen. Carl Levin (D-Mich.) told the Post.

Well amen, brother.

USA Today ran an article today stating that credit card issuers are embracing the idea of better terms disclosure to consumers, but bristling at the idea of restrictions on credit card fee increases and interest charges.

One can only hope that Congress will persevere in their scrutiny of the credit card industry and deliver real results that will help level the playing field for the consumer.

Well, I am still procrastinating on calling my credit card companies and negotiating a better deal. I did, however, check into why exactly my credit card interest rates have skyrocketed when I have paid the bills on time.

Two little dirty words: Universal default.

This enlightenment is courtesy of a very well-written article, “What credit card companies don’t want you to know,” by David Bach of Yahoo! Finance.

Bach outlines that it is completely legal for credit card companies to hike your interest rate to as much as 30 percent if you are late on paying other bills such as car loan, mortgage or utilities service! I had heard rumblings of this concept in the past, but thought it might be lore spread about by credit card haters.

Well it’s true, and guess what! I forgot to pay the electric bill one month. Yes, that’s what they all say, but I truly did forget. So that cost has been tripled many times over with skyrocketing interest rates caused by one, seemingly irrelevant error.

Most statistics report that between 40 and 45 percent of credit card companies have a universal default policy. Citigroup Inc., the third largest credit card issuer in America, recently abolished the practice, according to Reuters News Service. Good to know.

What have we learned today?

1) Check the terms and conditions for a universal default policy. Avoid those offers at all costs.

2) The consumer is in control. Those who have high credit card interest for no apparent reason should call the credit card company and threaten to go with a Citigroup balance transfer offer if they don’t drastically decrease your interest rate immediately.

So I’ve gotten a lot of offers for balance transfer cards lately. How did they know? This is something I have considered for a couple months.

I normally tear up any new credit card offers that arrive in the mail because I’m not mean-spirited enough to stuff all the incompleted materials into the pre-paid envelope and mail it back to the company.

However, upon noticing that the interest rate on both my cards is at 20 percent, the first logical question was, “Holy moley, how did that happen? I always paid on time, those *(#&$!!”

The next question: “Why not consolidate to a no-interest credit card?”

Well, I’ll give you three reasons:
1) The standard 3% transfer fee is discouraging, considering my high balances.

2) I’m not convinced a no-interest balance transfer card is the best option.

3) I don’t want to have a greater history of card-jumping than already exists on my credit record.

I have been down the balance transfer road before, and all it got me was another credit card with about four times as much debt. In my defense, I was young and stupid. We were all young and stupid at one time and did things we regret.

Those are learning experiences so we don’t wind up old and stupid. Like almost everyone else, I have different behavior patterns and much better self-control now that I’m older and (hopefully) wiser.

So here is my new plan of attack for these high-interest credit cards:
1) Call existing credit card companies and ask for a lower interest rate. Many have said a simple phone call can generate surprising results.

2) If still unsatisfied, transfer the balances to a card offering 0% intro APR for 15 months with a low fixed rate thereafter like the Advanta Platinum MasterCard. This card, for businesses only, was recommended by Smart Money magazine. The card’s 3% balance transfer fee maxes out at $50, which is pretty unusual. Some may be better off finding a low fixed-rate card with no balance transfer fee.

Here are some questions I have considered when mulling over the balance transfer issue, and please feel free to add your own thoughts to the mix:
1) How high is the balance transfer fee?
2) What are the minimum and maximum transfer fees?
3) How high is the annual fee?
4) What are the standard interest rates on balance transfers and new purchases?
5) If a zero- or low-APR introductory offer is included, how long does it last?
6) How high is the interest rate thereafter on the remaining balance?

Business Wire recently reported that new research by Auriemma Consulting Group shows the vast majority of credit card holders – 85% to be exact – are choosing not to transfer their balances. The top reason given was satisfaction with current interest rates.

Well, clearly that’s not me.

So, you may ask, why have I been considering ditching the high interest for a couple months and still no action?

Elementary, my dear Watson! I am a stubborn procrastinator. But maybe I’ll just make that phone call today … or tomorrow. After all, money doesn’t grow on trees. Stay tuned for the success I will hopefully be able to report sooner rather than later.