The Present and Future of Credit Card Terms
1. The average credit card Annual Percentage Rate is likely to increase in the coming months, from today’s 10.8% to as high as 15% according to some analysts.
2. All card issuers will raise your card interest rate if you violate any term of the card agreement. Some will raise your rate for any reason, including problems with other credit accounts that you have.
3. Card account fees remain major profit sources for the issuers, including late fees ($20-$39 depending on your balance) and over-limit fees (average $32).
4. Balance transfer and cash advance fees remain high and for some, are going higher, e.g., 3%-5%.
5. Last minute payments by phone will also cost you, typically $12-$15. Ouch.
6. Payment grace periods range from 20-25 days. But remember that there is no grace period if you carry a balance. Interest accrues from the day of the charge for those folks. Also keep in mind that all of the credit card issuers apply payments to the lowest interest rate balances first, leaving the highest interest rate balances to accrue more interest.
If you are wondering what happened to all of the federal credit card reform legislation, most of that doesn’t take effect until February 2010. Even then, plenty of loopholes remain that can cost you plenty.
Credit Card Pay-Off Strategies
To me, the best strategy for a baby boomer to consider in paying off credit card debt is this: ASAP. We are close to retirement and we are at greater risk from job loss. What other reasons do you need?
To help you determine when and how to pay down and eliminate that credit card debt, try these two payment calculators:
- The Bankrate Minimum Payment Calculator lets you plug-in balances, interest rates and payment amounts for multiple credit card accounts. The calculator output tells you when you will be finished with all of them. It may scare you but it won’t help not to look.
- The Federal Reserve Bank has a simplified credit card payment calculator. It will help you determine a payoff schedule and/or payoff amount for your particular circumstances.
Final Thoughts on Baby Boomers and Credit Card Debt
There is very little to like about credit cards in general and nothing to like about carrying a balance. It is so important that boomers get out of the debt business and particularly unsecured debt. Get busy and good luck.
Photo credit: iDanSimpson