Credit Card Dangers

One of the problems associated with owning credit cards is that the interest rates can fluctuate, sometimes dramatically. While you may periodically receive offers in the mail stating that you can get a card whose APR is 0% for a certain period of time, it's always a good idea to read the accompanying information that discloses what the rate will be after the introductory period is over.

When credit card companies decide to increase interest rates, your bill will include a small brochure indicating when and by how much the rate will rise. For variable-rate cards that are tied to an index, when the Federal Reserve raises or cuts interest rates, the credit card companies will typically follow suit.

At a time when we're all trying to save a dollar whenever and wherever we can, one of the things that you can do is to gather together all your credit card statements and take a good, long look at the interest rates you're currently paying. Unless you have impeccable credit, the rates will probably be rather high. Then, call each of the credit card companies and ask to have your rate lowered. In many cases, they will oblige as long as you've meticulously paid your bills on time and have had no recent negative marks on your credit report. Unfortunately, it may be necessary to check these rates monthly. Credit card companies seem to raise their interest rates with impunity, and it's important to keep an eye on your monthly statements either online or when delivered by regular mail.

Another good idea you'll want to implement is to begin paying down your credit card balances sooner rather than later. There are a number of disciplined, structured methods that you can use to accomplish this. One of the most effective is to start with your highest-interest debt first.

Let's turn our attention back to those 0% introductory offers for a moment. To be honest, the only time that this type of credit card might be helpful is if you're using it to pay off another high-interest-rate card. This is because that 'great' introductory rate is only going to last for six months or so, and in some cases only three months. If you plan to take advantage of such an offer, be sure that you'll be able to pay off the new card before its regular interest rate kicks in. Otherwise, you won't be doing any more than moving the debt from one place to another. The new card's rate could even go higher than your old rate, putting you in a worse position than you were originally.

And, while you've got all your credit cards statements in one place, here's another thing you'll want to check. Add up the total amount of interest you're pay monthly. Although you may be shocked when you see this number, here's another tidbit of information that could really cause you to see stars. Unless you're paying more than the minimum amount due each month, it could take you five- to ten years to pay off those bills. And if you have substantial debt – say, $10,000 or more – it could literally take decades. Something to think about, isn't it? If that doesn't spur you on to dig yourself of debt, nothing will.