Tough, new penalties on credit cards
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More and more credit card issuers will now raise your interest
rate if you slip up with another creditor.
So pay late on your Sears bill and the interest rate on your Citibank
credit cards could shoot up.
Credit card companies peek at customer credit reports on a regular
basis. Trouble anywhere on your credit report could mean a higher
interest rate on your credit card.
Thirty-nine percent of card issuers surveyed by Consumer Action
will raise your interest rate because of your payment record with
another creditor. Is your credit card company one of them? Check
out this chart.
The best advice for card customers is to keep your credit record
as clean as possible.
Review your credit report at least once a year and correct
any errors. The last thing you want is to get zinged with a
high rate on your credit card because of an error on your credit
And most importantly, pay that card bill on time every single
month. These tips and payment strategies will show you how:
Mind those payment guidelines
A key step is following your card issuer's payment guidelines
precisely. These guidelines are outlined on the back of each credit
When it comes to processing credit card payments, all these little
details are incredibly important. Payment guidelines may include
everything from a specific payment address to the time of day by
which the payment must be received to be credited that day. Many
issuers also stipulate that payments must arrive in the preprinted
envelope sent to the customer.
While the Fair Credit Billing Act requires issuers to credit payments
the day they are received, each issuer is allowed to set specific
payment guidelines. If any of the guidelines are not met, the issuer
can take as many as five days to credit the payment.
An on-time payment could easily become late during that five-day
period, so follow those payment guidelines carefully.
To ensure your payment gets credited immediately:
- Use the preprinted envelope provided by the credit
- Include the billing coupon, and be sure to write
the amount being paid in the box provided.
- Make sure checks are legible and the payment amount
is correct. Sign the check. Write the credit card account number
on the check.
- Send payment with proper postage to the payment
address requested by the issuer. It's a good idea to mail your
payment at least one week in advance of the due date. Ten days
to two weeks prior to a due date is even better.
Pay minimum immediately
The safest strategy for anyone sending a card payment by
snail mail is to pay the bill as soon as it arrives, even if you
can only make the minimum payment. Giving your issuer the 2 percent
minimum payment it wants ASAP is a great way to guard against late
fees. And you can always send a bigger payment when you've got more
Move your due date
Are your credit card bills due at a time of the month when
you're running low on cash? Many card issuers will let you set your
own due date if you ask. Why not time it so your credit card bill
arrives right after a paycheck? That way you'll have plenty of cash
to pay your bill each month.
Automatic online, on-time payments
Paying bills online can be a great buffer against late fees.
Most major issuers, including Citibank, MBNA, Discover and American
Express, accept online payments. You can sign up for these services
on issuer Web sites. Choose an online payment amount that automatically
covers the minimum amount due on a credit card each month. Next,
choose an automatic payment date well in advance of your credit
card due date. This is a great way to pay credit card bills while
traveling. To keep your interest costs down, you'll want to make
additional card payments online or by snail mail as soon as you
Pay by phone
Paying by phone is a quick and easy way to make a last-minute
card payment. Just grab your checkbook and call the toll-free number
on the back of your credit card. You'll be asked for a check number
and the bank routing number, which is printed at the bottom of every
check. After you're done with the call, rip up the check because
you won't be able to use it again. Many credit card companies accept
payments by phone. Some issuers charge fees ranging from $5 to $15
for this service. Be sure to ask.
More express options
If the due date is looming, consider sending a credit card
payment by express mail or wiring the payment with Western Union.
The U.S. Postal Service charges $13.65 for an express mail flat
rate envelope, which guarantees next-day delivery by noon to most
destinations. Wiring your payment will cost you as well. Western
Union's fees for money-wiring service vary depending upon the amount
of payment. These express services, while costly, are still cheaper
than most credit card late fees. Make sure you send your express
payment to the proper address. Many issuers have separate payment
addresses for express payments. The last thing you want to do is
slow the processing of an express payment by sending it to the wrong
No fee if you're "good"
Zapped with a late fee even though you mailed your payment
well before the due date? Call and ask your issuer to waive the
fee. Many issuers will waive late fees as a courtesy to customers
with good payment records.