American credit card debt is up more than 8% from a year ago. That's the highest amount ever recorded. In these tough economic times, it's important to keep a close eye on your credit cards. Consumer Reports says some companies are doubling or even tripling their interest rates—and it's not just happening to people with a bad credit rating.
Consumer Reports interviewed John Carmichael, who says he's always made his credit card payments on time and had never had problems with his credit rating. But earlier this year, the interest on his Bank of America Visa card nearly tripled overnight. From around 8% to nearly 25%!
Bank of America says Carmichael had too much debt, even though his card balance was almost $1000 below his limit. Carmichael speculates that banks are changing credit-card terms to compensate for their mortgage-related losses. Consumer Reports says that's possible because banks earn a large part of their revenue from credit cards. When the mortgage meltdown hit, they turned to credit cards to make up for slacking profits.
Credit card notices alert you to changes in your account. Although plenty are junk mail, Consumer Reports says don't toss out a notice without reading it. Otherwise you could miss important changes to your credit card account.
Banks often give you the choice to stop using your card and pay off the balance at the old rate, which is what John Carmichael worked out with Bank of America to avoid a rate increase. But not everybody does that.
Consumer Reports says with so many banks changing their terms, you need to navigate this new credit card jungle with care.
Consumer Reports says if you're not happy with your credit card terms, make a switch. You can compare cards online at sites such as Cardratings.com. Look for a card with a low interest rate and no annual fee. And always be sure you read through the card's terms and conditions before signing up, so there are no surprises later on.
Consumer Reports has no commercial relationship with any advertiser or sponsor appearing on this Web site.
Copyright © 2004-2008 Consumers Union of U.S., Inc.
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