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FINANCE TIPS FOR SINGLE MOMS Ignoring credit changes can
cost you Despite that rather obvious conclusion, studies show about two-thirds of credit card holders who receive such notices are not even aware that changes have been made to their accounts. Woefully uninformed, they ignore the significance of many important new clauses, such as the expiration of low interest rates, universal default agreements, and inflated late fees. The nonchalant attitude toward credit card changes is one of the many factors contributing to the explosion of consumer debt over the past 10 years, says Geri Detweiler, author of "The Ultimate Credit Handbook." Consumer debt in the U.S. -- including credit cards and auto loans, but not mortgages -- hit a record high $1.98 trillion in October, according to the Federal Reserve. That's about $18,700 per household. According to a recent survey by Auriemma Consulting Group, Westbury, N.Y., only one-third of 832 card holders who received change-of-term notices even noticed the revisions and fewer still knew what to look for when they received the notification. "I'd say in the majority of cases, when you're getting a change in terms, the terms are seldom in the card holder's favor," says C. Scott Strumello, of ACG. Card issuers are to blame, in part because they tend not to emphasize rate increases or new penalties in their notices to consumers. "You're likely to get a nice envelope that says, in large bold print, 'SAVE with 3.9 percent.' But never a change-of-terms notice that says on the envelope, in large bold print, 'LATE FEE RAISED TO $35!'" cautions personal finances adviser Scott Bilker of DebtSmart.com and author of "Credit Card and Debt Management." Credit card issuers for years have been aware of consumer laxity in reading credit-term changes on a regular basis, says Paul Richard, executive director of the San Diego-based Institute of Consumer Financial Education Even if changes are phrased in hard-to-follow legalese, Richard warns, ultimately it's the card holder's job to master an understanding of the terms. "While there are times these documents might be difficult to follow, the bottom line is always: Let the buyer beware. These agreements are largely written to satisfy a state or federal law related to fair credit collections -- not to be reader-friendly." Richard urges consumers to carefully examine every term-change notice, paying particular attention to four key areas:
In addition, Bilker advises, a careful reading of the card agreement may allow you to reject a limited number of terms without having to close your account. Usually, if you refuse changes, you must stop using the card and repay your outstanding balance under the original terms. Continued use of the card constitutes your agreement with the changes. "In other words, it's a negative offer," says Bilker. "If you don't reply, then you agree." Once the changes are made, there's not much you can do about them. It's written into most agreements that the banks retain the right to make those changes if and when they please. "Nevertheless, it can't hurt
to call and ask. And heck, while you have them on the phone, see if they can
lower your rate, waive a fee, or raise your limit," encourages Bilker, also the
author of the recently published "Talk Your Way Out of Credit Card Debt." |
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