There was a great article in my November edition of Consumer Reports. The title of the article was Take Control of Your Credit Cards: How to Fight Back Against Higher Rates, Fees, and Abusive Practices. It is no secret that credit card companies are not the public’s favorite “service provider”, especially over the past 6 to 12 months. The great thing about this article, however, is not only does it provide some advice and insight as to how to fight back against some of these companies unfair practices, but it also does a really good analysis of some of the best cards out there!
Because I’m a numbers guy, I love that the article starts off with some really great statistics. Surprisingly, according to this article, Americans as a whole aren’t as bad as I would have thought with their credit cards. The article says that one third of Americans don’t own a credit card, and of the other two thirds, 54% pay their balance in full each month, 33% carry balances up to $10,000, and only 13% carry balances over $10,000 (the average balance was $17,366). Of the individuals who were surveyed, 21% said they felt like they had been treated unfairly by their credit card companies and 41% said they were highly satisfied with their card issuer.
This seeming decrease in debt, or at least decrease in the use of debt, can most likely be attributed to the downturn and massive de-levering by both companies and consumers in 2008. According to the article, a federal law that will take effect in February will force credit card companies to become more consumer friendly. Because of this, industry professionals expect card companies to try and offset the potential decrease in revenue that will accompany these new laws. One research company expects average Annual Percentage Rates to rise from about 14% currently to a whopping 19%. The study also showed that 27% of new cards issued now carry annual fees.
If you’ve been paying attention, you are also aware that card companies are decreasing rewards for those of us who are on-time payers. Some companies require you accumulate more points or miles before you can redeem, and other now threaten to remove all of your accumulated rewards if you have consecutive late payments. Card companies are also having a negative impact on your credit score by cutting back credit lines which you may have never even requested increases on.
The article goes on to explain some steps you can take to protect yourself. Some of the steps include using your rewards quickly, choosing cash back over points or miles, and making sure that if you do pay an annual fee, you at least use the card enough to receive rewards greater than the fee.
As you listen to the show, I will walk through the part of the article that explains what to do depending on what type of cardholder you may be. Some common types include the on-time payer, the low-balance holder, and the individual with growing balances.
You may want to check out some of these top cards that Consumer Reports recommends:
Balance Transfer Cards
- American Express Clear
- PenFed Visa Platinum
- People’s United Bank Platinum Mastercard
Low-Rate Cards
- Iberiabank Visa Classic
- Simmons First Visa Platinum
Cash-Back Cards
- American Express Blue Cash
- Capital One No Hassle Cash Rewards
- Fidelity Rewards American Express
- Schwab Invest First Visa
Remember, you need to make sure you do your due diligence and homework. Use sites such as bankrate.com to find some of the best deals out there. Don’t just pick a card because someone else says it is good. You need to select credit cards that match your goals, needs, and spending habits. Remember, also, that it is a tool, just like a knife, if your not careful, it can hurt you!
