Credit Card Know-How That Can Help You Save

Good Habits Can Help Keep those Annoying Rates Down and Boost Your Limits

By Stephen Mazeika

During this time of economic slumping and belt-tightening by companies across many different industries, it can be increasingly more difficult to maintain steady interest rates and credit limits at a desirable level. The best way to protect against negative changes to your account is to "make sure you don't spend what you don't have, you don't carry a balance, and you pay bills on time," says Ethan Ewing, president of Bills.com.

Simple concept as it is, sticking to this age-old mantra is the first step in saving you a bundle in the long run, and increases the possibility of a credit limit extension by your provider because, likened to the penal system, credit card companies award those with good behavior.

Here are some good habits that can serve as steroids to give your financial health that extra boost.

Longevity is the key

Shopping around for a credit card shouldn’t be anywhere near like choosing between McDonald’s and Wendy’s for a meal. Consumers need to think long term when choosing one, since a card can last them for many years. Experts also caution consumers to be wary of committing to cards that promise appealing prescreened rates.

"Just because you get a prescreened offer doesn't mean you are eligible for that credit offer as well," says Mindy A. Bockstein, chairperson and executive director of the New York State Consumer Protection Board.

People need to also keep in mind that opening up to many retail credit cards can hurt your FICO score, as they typically carry lower limits and higher interest rates than normal cards.

Read your card agreement thoroughly

This may seem like a no-brainer, but oftentimes it’s the fine print that can catch consumers off guard. This is typically the area where unsuspecting card customers can overlook certain charges such as balance transfer, annual, late, and cash advance fees. Don’t get blindsided by fees you didn’t know about.

Paying is good?

Absolutely. Paying your balances in full, paying above your monthly minimums and paying on time are all ways that will help you save in the long run. What are the benefits? You save yourself late fees that can run anywhere from $22-29 depending on your card, as long as you pay within 30 days of getting the bill. If an extraordinary circumstance arises, you usually have the fee reduced or waived as long as you’ve consistently been a good customer.

If you pay your balance in full every month, you are almost guaranteed no interest charge which is great in the long run and can save you a bundle. And the best part of all; your credit score will increase dramatically with a combination of all these three. In this case, paying more is good.

Understand your limit

It always helps to know exactly what your limit is. No matter how obvious this concept seems, many people think they are aware of their limits and how much they’ve spent but oftentimes they are wrong, and the consequences are too costly for such an easily avoided error. Your credit score will decrease when your card gets maxed out, which brings with it a credit score drop and those dreaded over limit fees that could possibly cause your provider to stick you with the default rate.

Don't 'bite off more than you can chew'

Although it may sometimes be tempting, avoid opening up an unnecessary amount of credit cards. This can lead to increased spending which not only hurts your bottom line, but also may overextend you and lead to a worsening credit situation. Experts also advise not to close cards too swiftly, especially several months before you plan on taking out a loan, as this may hurt your credit score and your chances of securing the loan.

Keep regular track of your score and transactions

Knowing what your credit score regularly is a very intelligent routine to keep. This not only keeps you up to date, it also can help you catch something sooner rather than later that you believe may have affected it such as theft or inaccuracies. In fact, it is possible to check your credit report at sites such as www.gofreecredit.com, so there’s no excuse not to.

Monitoring your transactions is also another way to keep tabs on what is going on with your credit, and to catch things as soon as possible so they can be resolved quickly. This is one of the easiest ways to catch identity theft or credit card fraud as unauthorized charges that appear in a statement are a sure sign that this has occurred.

Lower rates are as close as a phone call away

Consumers should periodically call their card provider to appeal for a lower rate. Along with being very convenient, it is often successful, especially with a good accompanying credit and payment history. However, if you haven’t exactly been a model credit card customer lately, you may want to hold off. "If you've had a late payment or gone over your credit limit, wait at least six months before asking for a lower rate," suggests Kristine McKinley, a Certified Financial Planner and CPA at Beacon Financial Advisors.

Remember: you’ve got the power

Remember the phrase the customer is always right. Although credit cards differ tremendously from complaining about bad food or service at a restaurant, in many ways they are both the same. Both have a fear of losing business, especially to competing companies. This is obviously a last-ditch option, but in tough times like this where credit cards are getting stricter with their policies and treatment of customers, it may be suitable; especially after previous efforts have failed.

"Move your business elsewhere if you've done nothing wrong and they start changing the rules on you," says Ewing of Bills.com. This is especially true if after repeated attempts to call and negotiate rates and other card features have failed.