I’ve been writing about default rates recently, as banks have been slapping people with these astronomical penalties with great frequency lately. In the past, a consumer with good credit and a solid history of making payments on time could often be late once and not be penalized with a 29.99% default interest rate. This is not the case anymore.
So, were the late Johnny Cochran, former lawyer for O.J. Simpson, alive today, I’m pretty sure he’d say something like this: IF YOU ARE LATE, YOU WILL PAY THE DEFAULT RATE.
Yes, its cheesy. But hopefully its catchy enough to keep you paying your credit bill on time. And if that won’t do it, maybe the unfortunate story of a recent visitor named Cliff will persuade you:
“…Had a death in the family this month at the beginning of the month.Was out of town a week & when I got back,I realized that i forgot to mail a (credit card) payment out. I paid quickly by phone,but was about 13 days late. I paid what they asked, April’s bill & Mays bill, plus the $39.00 late charge,plus interest. Bottom line seamed high at the time,but i paid to try & stay in good standings.When I got my next bill,they had raised my limit from 8.9% to 29.9 %.I called & tried to get them to bend a little,but they wouldn’t.I would transfer to other cards,but can’t at this time (Editor’s Note: The reason Cliff cannot get a balance transfer is because he has credit score issues caused by a change of address related late payment). What should I do to get the rates down.Thanks,Cliff.”
In the past, the solution for Cliff would be easy. Call the credit card company, ask for a supervisor, and repeat until they reduce the interest rate. Last year, this would be no problem. Today, Cliff is facing an uphill battle. His crime: going to a funeral.
Now, as much as I’d like to vent about how unfair default rates are, every credit cardholder has agreed to these terms. Many overlook these clauses. But they are in every credit card contract. And as a believer in both the law and personal responsibility, it is every credit cardholders’ obligation to make timely payments. Is it fair? Ethically, I don’t think so. But fair is not the issue. And banks that issue credit cards are not your friends.
So, without further ado, here are some easy steps you can take to avoid getting hit with credit card default rates:
- If you don’t have online payments set up, do it now.
- The minute your credit card bill comes in the mail, go online and pay it. If you’re on this website, you can get online. So please, pay your bill promptly the day it arrives.
- Pay your credit card bill before every other bill you have. Your cable company won’t charge you 30% interest if you’re a few days late. And utility companies won’t shut your water, power, or heat off for being a day late either. Your credit card company, on the other hand, will raise your rates immediately. They will do this because you’ve given them the okay, whether you know it or not.
- Don’t pay your credit card with rubber money. You bounce a check, they raise your rates. And, while I think overdraft fees are absurd, if you have to choose between overdrafting your bank account and paying a $29 fee or overdrafting on your credit card bill and getting a $29 and a doubling on your interest rate, choose wisely.
- Consolidate your credit card debt onto as few cards as possible. Many of us juggle three, five or even ten credit card bills. If you can get a 0% balance transfer (and, for the time being, you still can) transfer your balances onto a card with a low rate and eliminate some of the bills. The less bills, the less likely you are to miss one of your payments (you can compare and apply for balance transfer credit cards here.)
Now, I apologize for taking such a harsh tone. And if you got the impression I approve of these credit card practices, I apologize for being unclear. Ultimately, the point of this rant is to help as many consumers as possible avoid the situation that Cliff is now in. Based on what he shared, I think its safe to say that he’s no different than the rest of us. He’s a guy that made an honest mistake that many of our friends and family members make every day.
Unfortunately, credit card companies don’t care about any of us. And while there’s nothing we can do to help Cliff out, I think he’s the type of guy who would take some solace in the fact that his story may have helped other people avoid credit card default.
So let’s all do Cliff a favor and pay our credit cards on time.
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