Taking Charge of Your Credit Cards

For most of us, the holiday season means increased spending on gifts, travel, and entertaining. And, like it or not, increased spending usually translates into heavy credit card usage that can make or break you. As credit card options become more diverse and, in some cases, more expensive, the California Society of CPAs offers the following advice to help you take charge of your credit card debt.

Know Your Options

All credit cards are not the same. In addition to bank credit cards, travel and entertainment cards, and charge cards issued by retail businesses, now there are cards that give rebates, offer frequent flyer miles and hotel room discounts, and a credit card that doubles as a telephone calling card.

Keep in mind that even though a card belongs to the Visa or MasterCard network, the issuing bank or financial institution sets the rules regarding annual fees, interest charges, and payment billing practices. With all the options available, it’s easy to see why choosing the right credit card is more challenging than ever.

Choose the Card That Suits You Best

If you typically carry a balance on your credit card, you should look for a card with the lowest interest rate. On the other hand, if you pay your balance in full every month—which is recommended—you want to look for a card with no annual fee, and with a grace period (the amount of time you have to pay your bill before you start accruing interest) of 25 days or longer.

Rebate and airline cards usually carry a higher interest rate, but if you pay the entire bill each month, you can come out ahead, particularly when you charge large purchases, such as college tuition, and pay your balance in full at the end of the month. Just be sure to read the fine print. For example, on airline cards check out blackout dates, types of seats available, route restrictions, expiration dates, and the limit on the number of miles you can earn in a year.

And don’t kid yourself when it comes to credit cards with tempting introductory offers of super low rates. You may think you will pay off the balance before the rate skyrockets, but unless you’re absolutely sure you have the discipline to either pay off the balance or switch the balance to another low-rate card offer, don’t fall for this marketing ploy.

Reduce Interest Costs

If you’re paying high interest rates on your credit cards, you should consider transferring your balances to a lower-rate credit card. You can search the Internet for a better deal, but if you’re a good credit risk, that may not be necessary. In many cases, a credit card issuer will lower the rate rather than lose a customer. Call the toll-free number on your bill and inform your current card issuer that you’re planning to switch cards for a lower rate. If you are a good customer, it may not be too difficult to negotiate a lower interest rate.

Know Your Credit Card Rights

It’s a good idea to keep the receipts for all your charge purchases during the month and check them against your monthly statement. If you believe there is an error on your bill, the Fair Credit Billing Act provides you with recourse. You are required to write to the creditor within 60 days of the bill’s date, with your name and account number, as well as the date, amount and nature of the error. Explain why you believe the item is an error, and do not send payment for the disputed amount. Credit card companies usually have 30 days to respond and 90 days to resolve the problem.

As a cardholder, you also have the legal right to withhold payment for defective merchandise as long as you have made a good faith effort to resolve the problem with the merchant. To qualify, the purchase must cost more than $50 and must be made in your home state or within 100 miles of your mailing address. For detailed instructions check your credit card bill or cardholder agreement.

Credit cards are convenient and easy to use—and abuse. If you have problems controlling your debt, consult with a CPA. By following the advice of CPAs, you can get back on track and remain in control of your credit cards.