Credit Card Debt – Watch Your Credit Report and Your Bill
by: Charlie Essmeier
Most consumers are aware of the importance of their credit
report. This document, offered to consumers and lenders by the three
major credit bureaus, offers a fairly complete list of financial
transactions and debts incurred by a consumer. Lenders examine the
report, along with the associated FICO score, to determine whether a
consumer is worthy of receiving additional credit or loans. What many
consumers may not know is that credit card companies regularly check
their credit reports, and unfavorable entries may result in a higher
interest rate on their credit cards.
We have previously noted that many credit card companies employ
something known as a “universal default clause” in their terms of
service. This clause allows the company to raise interest rates on the
customer’s card if the customer pays bills late. A late payment to the
phone company could result in a higher interest rate on the Visa card.
Most companies also allow themselves the latitude to raise their
customers’ interest rates for any reason at all. With this in mind, the
credit card companies tend to run occasional credit checks on their
customers, often raising rates if they notice any activity that, in
their opinion, makes the customer a higher risk. This might happen even
if the customer has a history of paying his or her credit card bills on
time.
The sorts of things that may create a “risky” client include
taking out additional loans, additional credit cards, or building
balances on existing cards to at or near their limits. The companies
justify this activity by saying that consumers who do these things
create greater risk for the lender, and these costs must be passed on
to all of their customers. The problem for the customer is that these
higher interest rates are often assigned without warning. The new rate
applies to existing balances, too. An interest rate hike today could
mean that the television you bought last fall has suddenly become more
expensive.
What can consumers do? Keep an eye on your credit card bill and
your credit report. You can receive a copy of your credit report, for
free, at http://www.annualcreditreport.com.
As for your credit card bill, watch the interest rate. If it abruptly
changes to a higher rate, call your credit card issuer and ask them
about it. They will often reduce the rate if you call and complain. If
not, your only option may be to shop around for another card.
About The Author ©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com, a site devoted to debt consolidation and credit counseling. |
posted by Firehorse Investments at 8:13 PM
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