Monday, January 25, 2010

My Card Wasn't Maxed Out Yesterday

I believe I have mentioned that credit card companies are ruthless and have no problem cheating you out of your hard earned money before. Well I would like to take this opportunity to divulge one of their clever tricks. This has happened to a few people I know. It starts off with you missing one payment on a card that you have been carrying a balance on and before you know it your interest rate jumps to 29.99% and they tell you that your card is maxed out and thus your interest rate has been placed higher.

But I Didn't Max It Out

Your right, because you missed a payment your limit was lowered and thus you are maxed out. Most cards will go to a much higher interest rate on maxed cards and that is why you're paying twice as much interest now. Some creditors will even lower your credit limit to less than your balance and try to charge you an overage fee, don't pay it call them up and tell them you won't pay it they will remove it if you work with them and convince them that you will be paying on the card.

Now What

Well the first thing to do is pay down the card because the balance is negatively affecting your credit score." Credit utilization is 30% of your credit score and is expressed as a percentage." (About.Com) The next thing to do is never charge more than 30% - 50% of the limit on a card. Doing so keeps your utilization down and if you miss a payment they most likely won't lower the limit on your card to your balance. When you have a high balance by percentage they know you are vulnerable and they are more likely to take action. Also consider getting rid of that card after your done. Reed more about the downsides to credit cards: Are Credit Cards Really "The Devil".

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