April has been Credit Card Question and Answer month here at Financial Elite. We are going to end the month with information provided from an article from SmartMoney about the little known rules that are costing you money and putting your credit, your identity and your family at risk.
1. "We're just waiting for you to screw up."
Many things can cause your credit card interest rate to go way up into the stratosphere, but nothing faster than universal default. You can make all your credit card payments month after month for a long time, but fall behind on your utility bills and all of a sudden you are a deadbeat and you will be charged accordingly. Interest rates can change at a moments notice, from low and reasonable to up to 35%.
Credit card companies say the reason they do this is to manage risk. Consumers groups disagree, because many people in universal default aren't deadbeats by any means. For example, you dispute a medical bill or are waiting for an insurance snafu to be resolved. If a billing clerk kicks it to collections, you're in universal default. Or let's say your credit score drops--a common event that may be entirely unrelated to your bill paying behavior. That's also likely to push your interest rate higher.
The best way to avoid this problem is to pay your bills on time. Bankrate.com, a personal finance Web site, further advises that if you have a disputed bill, resolve it before it reaches collection status.
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