NDSU Extension Service - Ramsey County


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Credit Card Woes

Credit Card Woes



            Credit cards were first used in the early 1900s, when oil companies and department stories issued their own cards.  Those cards were accepted only at the business that issued the card and in limited locations. The first bank card, named "Charg-It," that could be used in multiple locations was introduced in 1946 by John Biggins, a banker in Brooklyn.
            The convenience of credit cards was quickly recognized and unfortunately, so were the type of problems with them that continue today. Whether due to confusion or carelessness, credit card mistakes are all too common. The fallout can be costly, no matter what the cause. Even a single slip-up can result in higher interest rates, lower credit limits, unwanted fees or dings to a credit score.
            New rules put in place by the Credit CARD Act of 2009 and the Dodd-Frank Act of 2010 help, as does the formation of the Consumer Financial Protection Bureau, which monitors the credit-card industry. But ultimately it’s up to the consumer to use credit wisely. Common credit card woes and how to avoid them follow.
            Late payments, especially those more than 30 days overdue, can hurt your credit score. Payment history accounts for 35% of a FICO score, the most common credit score, which ranges from 300 to 850. A single 30-days-late payment can drop your score by 60 to 110 points, according to CreditCards.com. Use a signal on a wall calendar, your smartphone or your computer as a reminder to pay your bills on time, every time. The CARD Act requires banks to mail your statement at least 21 days before the due date.

            Those low introductory rate cards are tempting.  Moving debt from a high-interest-rate card to one with a low introductory rate can make financial sense--but only if you read the fine print. If you ignore or misunderstand balance-transfer rules, you could end up owing even more.
Start with reviewing how long the introductory offer lasts. Next, check whether an introductory offer entails a transfer fee.

            Most of us know that we should pay more than the monthly minimum on a credit card bill, but it may seem simpler to pay only the minimum balance. If you have a balance of $5,000 with an APR of 14%, and you only pay the minimum of $100, it will take 22 years to pay off the debt in full, according to a Federal Reserve credit card calculator. Monthly credit card statements now include information on how long it will take to pay off your balance by only making minimum payments, as well as how much you would need to pay to erase your debt in three years.
            Busy, busy lives may not leave much time for reading but reading your credit card statement each month should be required reading for everyone. A few moments looking over your statement will insure you catch any mistakes or attempted fraud before it it’s a serious issue.  If you find any unusual charges call your lender immediately to report discrepancies.


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