Financial Literacy - Credit savvy
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Credit cards not all the same

How to avoid: Not every credit card has a grace period for new purchases, and most don't offer one on balance transfers and cash advances. Make a note of how many interest-free days a card offers if you plan on paying it off every month.

If you splurge one month and charge a 50-inch TV, paying before the grace period is up could save you a chunk of change.

Default rate

Most cardholders have the best intentions when they sign up for a credit card. No one plans to pay late or go over their credit limit, so it's easy to disregard an outrageous default rate or a notoriously unforgiving issuer.

"People have good intentions and don't anticipate having a problem. But you want to watch out because it can be very expensive if you do trip up," says Gerri Detweiler, a credit adviser for Credit.com.

Cardholders that accidentally pay late and stumble into default-rate territory get to experience the one-two punch of being socked with a late fee plus enduring a punishing interest rate.

The penalty rate can be found with other major need-to-know information in what is called the Schumer box, named for the New York senator who invented it, in the terms and conditions of the card agreement.

"The Schumer box will tell you what the default rate is on that card," says Curtis Arnold, founder of Cardratings.com and author of "How You Can Profit From Credit Cards."

"If you are in default, your rate jacks up to 30 percent overnight. That is good to know because default rates do vary."

Not always quite so easy to find are the directions on how to avoid getting hit by the default rate.

"What triggers the default rate varies fairly widely," Arnold says. "These are crucial issues because some issuers -- Capital One, for instance -- are very liberal. According to their head PR person, you can be late three times in a 12-month period before they engage the default rate," he says.

"But there are issuers that are real trigger-happy. You're late once and -- bam! -- your rate goes up double or triple overnight," says Arnold.

How to avoid: Obviously, never pay late. Beyond that, shop around for a card that allows more than one mistake or a relatively low default rate. If you carry a balance, credit card companies know it's not if you'll mess up but when.

Letters get lost in the mail and emergencies occur. So seek out and do business with credit issuers that treat you less like a wallet with a mailing address and more like a human being.

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Product Rate Change Last week
Balance Transfer Cards 15.67% --0.00 15.67%
Cash Back Cards 16.36%  0.01 16.35%
Low Interest Cards 10.87% --0.00 10.87%
 
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