Financial Literacy - Credit savvy
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Coping with lower credit card limits

If your credit card company charges 3 percent to transfer $5,000, it costs you $150. If you don't pay off the balance before the introductory period is over, you'll end up paying interest on that $150 as well.

Consider dusting off an alternate credit card if it has a favorable interest rate and a low balance.

"If you already have another card you are saving for a rainy day, use it occasionally, as it might not be renewed if it is inactive for long periods of time," Sherry says.

Make sure you read and understand the terms of any credit card offer. One late payment could result in your introductory rate skyrocketing to a much higher variable rate or a default interest rate.

Search beyond big banks

Despite the credit crunch, there's a tremendous amount of competition for good-quality accounts, according to Tim Kolk, managing partner of credit card consulting firm Brookwood Capital.

If you're unhappy with how you're being treated by your present credit card provider, you can sift through a wide variety of consumer plastic in Bankrate's credit card database to find a card that meets your needs.

There's a catch, of course. Your consumer clout will depend on how good your credit score is. In today's environment, you'll need a score of at least 700 to get the best credit card deals, Kolk says.

Make sure you carefully monitor any offers that arrive in the mail and don't hesitate to use a little legwork on top of an online search. Sometimes the best deals can be found right in your own neighborhood.

"I think someone who is having a little trouble with a major national card issuer would be well served to go to their local banks and credit unions," Kolk says.

He says local banks and credit unions tend to know their customers better, and they've historically had better credit performance -- meaning fewer defaults -- than the big credit card issuers.

"For a decade, credit union charge-off rates were about 2 percent, when big banks went from 4 to 6 percent or 7 percent and bounced around. So that's a pretty compelling advantage," he says.

Learn to use credit more wisely

"The bottom line is, credit card companies are tracking our spending habits, our debt, etc. Consumers don't need to freak out about that, but we do need to proactively manage our credit more than ever," says Curtis Arnold, founder of Cardratings.com.

If the limit on one or more of your credit cards is lowered, it may mean that card issuers are starting to view you as a greater credit risk.

Some card issuers are adopting complex credit-scoring models that take into account where you live geographically and the stores at which you shop. They also may be looking at whether you use your credit card to pay for things like groceries -- a sign that you may be experiencing financial trouble.

Monitor your credit reports often. Because you can request a free report every 12 months from each of the three credit reporting agencies, rotate among them so you can check it every four months. Take a look at how many of your accounts, if any, have high balances in relation to your credit line and whether the report contains derogatory information, such as late payments.

These would be telltale signs that you are on the radar screen for a credit line decrease or a bump in your interest rate.

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Try to pay off balances each month and read the printed material that comes with your monthly statements. Credit card issuers often slip in important information about your account along with marketing offers.

Be sure to monitor your balance and keep it under 30 percent of your credit limit to prevent further dings on your credit score. Avoid exceeding your limit, because that can cost you plenty in over-limit fees, says Consumer Action's Linda Sherry. If that happens, you also may face a high default rate.

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Product Rate Change Last week
Balance Transfer Cards 15.73% --0.00 15.73%
Cash Back Cards 16.43% --0.00 16.43%
Low Interest Cards 10.98% --0.00 10.98%
 
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