WHERE DID YOU GET GOT?
It's time to take stock of your credit cards
with an eye toward easing 2001
First in a five-part series: Where did you get got?
By Lucy Lazarony • Bankrate.com

Quick! What's the annual percentage rate, credit limit and balance on every credit card packed in that wallet?

Don't know? Don't worry. Plenty of people can't answer the most basic questions about the credit cards they carry. But now is a great time to change that. And it's the only way to make those credit card bills less painful in 2001.

Annual percentage rates

Knowing the annual percentage rates on each card is essential for people who carry a balance from month to month. After all, it determines how much the credit card company will charge in interest.

People with big balances may want to transfer some of them to lower rate cards or take advantage of cards with low introductory, or teaser, rates. Many credit card issuers are promoting cards with teaser rates, but be careful as those low rates don't last long.

Lots of people jump from one teaser rate offer to another to minimize finance charges. Each of those account openings and closings will appear on a person's credit report, where a lot of activity can be viewed as a sign of instability. And no matter how much a person jumps, that pesky credit card balance will only go away by paying it off. And that means paying more than the minimum payment on a regular basis. Even an extra $50 a month makes a big difference.

Balance

When it comes to credit card balances, lots of people underestimate just how much they owe because they have balances scattered across a handful of cards and they fail to tally up. Get out the calculator and do it. Daunting as that may be, it helps to know how deep that hole is before starting the long climb out of debt.

Many credit card Advisers suggest focusing on paying off the balance with the highest annual percentage rate first.

Yet some people are happier paying off two small credit card balances before tackling the big balance with a high annual percentage rate. If having three credit card bills to pay instead of five will inspire them to keep chipping away at their overall card debt, credit counselors say, "Go for it!"

"Discipline and continuity is what it's going to take to get you out of debt," said Steve Rhode, president of myvesta.org, a nonprofit credit counseling service. "The hurdle is not adding up the debt. The hurdle is what you're going to do about it."

And, of course, getting a handle on credit card debt means getting a handle on credit card spending. Experts suggest that people working to pay down big balances use their cards as little as possible and try to pay off any new charges at the end of each month.

"Make sure you have enough money to pay off bills when they come in," said Howard Dvorkin, president of Consolidated Credit Counseling Services in Fort Lauderdale, Fla. "If you don't have the money, don't use the card."

One trick for adopting a pay-as-you-go strategy with credit cards is to pencil purchases in a checkbook register. Doing so will prevent any surprises when the bill comes, Rhode said.

Credit limits

While tallying up those credit card balances, be sure to take note of each card's credit limit as well. Lenders view all open credit lines as potential debt. Too much unused credit may affect a person's ability to qualify for a home or car loan.

To avoid racking up high credit lines, close off all unused accounts, including department store cards. Be sure to cancel old credit card accounts after transferring balances to a new card.

The Consumer Federation of America suggests people carry credit lines no greater than 20 percent of their gross household income. For example, people with a gross income of $50,000 would cap credit lines at $10,000.

Consumers who wish to have a credit limit lowered should contact their issuer.

Fees

When sizing up credit card costs, fees cannot be overlooked.

Sloppy bill-paying has never been more expensive. Late fees and over-the-limit fees are rising, with many issuers charging as much as $29 for each infraction. Make note of each card's payment date. Some credit experts advise paying a credit card bill the day it arrives. Cutting things close can get costly.

One day late is enough to be slapped with a fee. Two late payments can slam a penalty interest rate -- as high as 26 percent -- into effect.

People who have been caught with a late fee in the last year may want to figure out why. Was it because they simply forgot? Were they running short of cash and couldn't pay until the next paycheck arrived? Were they overwhelmed by all the end-of-the-month bills and a credit card bill got lost in the shuffle? Were they late more than once? If it's a cash-flow problem, they may want to consider calling the credit card issuer and having the due date moved, so it's away from the due dates of big monthly expenses such as rent or a car payment.

Does the card come with an annual fee? Plenty of cards don't. It might be wise to shop around for a card without an annual fee, especially for people who pay off credit card balances each month. The exception: a card with an attractive rewards program, such as an air miles card.

-- Updated: Dec. 12, 2000