Frugal Mania

An article in this week’s Parade Magazine got me to thinking about credit card debt, and how many people around the world fall victim to it without ever intending to do so.  Here are a few statistics of which you may not have been aware:

• According to the Federal Reserve Board, credit card debt in the United States has reached an all time high of almost $1 trillion dollars.
• Between October of 2006 and October of 2007, the amount of credit card debt that was over 30 days late amounted to $17.6 billion, an increase of 26 percent.
• In 2006 it was estimated that there were four credit cards to every adult in the United Kingdom.

While the average new credit card rate has dropped this year, that doesn’t mean you need to jump on the next credit card offer that comes sneaking quietly into your home with the mail.  Here are a few tips to keep in mind when looking for a new credit card or using your existing credit cards:

• Read all of the fine print and know what the rate is as well as any annual or one time fees that may be associated with the card.
• Do not spend more on your credit card than you can pay off when the bill comes in.  That doesn’t mean waiting until it is due to send it off, that means paying it off the same day you get the bill.  Interest rates and fees add up quickly and can soak you quickly.  In fact, almost half of the credit card industry’s $40.7 billion profit in 2007 came from interest and penalties for "revolvers" - people who carry balances from one month to to the next.
• If you fall behind in your payments, the company may (and probably will) raise your interest rate without warning.  Read every word of every bill and notice you receive and always be aware of how much it is costing you to have a particular credit card.
• Late fees have risen in recent years from an average of $19 per instance to $35 or more now.
• Never use a credit card for a cash advance.  There are fees associated with it that will add up fast.
• If you accept a credit card offer because of a low (or 0%) introductory rate and balance transfer special, take great caution and ensure that you do everything on or before the due date.  Don’t get caught up in a credit card with a high interest rate because of an enticing initial offer.

In the end, you will be better off by paying off the existing credit card debt you have and closing the accounts.  Keep one or two cards with the best interest rates, but always pay them off every month that you use them.