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Related Consumer Finance Programs - The following lists of companies and financial service providers offer services to assist you with handling your debts. Combine debt with a consolidation loan or use a credit counseling or debt relief program for help with lowering your payments and getting your credit card bills and other obligations under control.
- Personal Loan Companies - Shopping for a personal loan online? Need to consolidate debt, but do not want to put up collateral (such as your home or car) as security? These loans are typically referred to as unsecured or signature loans, because only your signature may be required.
- Debt Settlement Companies - Simply too much debt to get a grip on? Review a list of companies and learn more about this service that uses debt negotiation and arbitration to help people that need assistance with eliminating their debts.
- Debt Management Consolidation - Having trouble keeping up with your monthly credit payments? Compare debt management companies in this online list that can try amd help you get a grip on your personal financial situation.
Avoiding Costly Banking Mistakes: No Trivial Pursuit
Here are clues to preventing expensive errors with your checking account, credit card or other financial services. After all, this isn't play money!
Signing up for a new credit card without understanding the costs
You've probably seen or heard of all kinds of incentives to convince people to apply for a new credit card or switch from one card to another. Among them: "zero-percent interest" for a certain amount of time on new purchases or a balance transferred from a competitor's card, "no payments" on purchases until the next year, "earn more points" for free travel, or get a free T-shirt if you apply for a new card. Sounds great, but these freebies could end up being expensive, especially if you don't follow the rules of the new card.
"While there are good deals out there on new credit cards, it pays to shop around for a card that best fits your circumstances," said Kincaid. "Also be sure to read the highlighted disclosures as well as the fine print because an uninformed decision can be costly."
For example, let's say you choose a card with a "grace period" (a certain number of days you have to pay the balance before incurring interest or fees) but, after a few months, you decide not to pay your bill in full. With some cards, the issuer might retroactively charge interest on the balance from the previous month, thus eliminating the earlier grace period.
If you get a new credit card promoting zero-percent interest on new purchases and you don't pay off the entire balance by the due date (typically after six to 18 months), you may be charged interest on all your original purchase amounts — not just on your remaining balance — retroactive to the original purchase date. The resulting costs could be more than if you had used a card without a zero-percent offer.
Or, suppose you agree to your card company's offer to "upgrade" to a new version of your card and you don't take the time to study the new card's restrictions or fees, as sometimes happens when customers quickly say "yes" to an offer from a customer service representative over the phone. You might be giving up a better deal you had with your old card. "Make sure the upgrades are what you need and will use," said Kincaid.
What can be bad about signing up for new cards only to take advantage of an introductory offer or even a free T-shirt? Well, you can reduce your credit score and make it costlier to get a loan because each credit card represents money that you could borrow — even if you intend to rarely use the card. To lenders, too many cards in your wallet may mean you could have problems repaying a loan, and that's a reason to charge you a higher interest rate.
"Repeatedly signing up for new cards — even to keep introductory rates going — can give lenders the impression that you may be desperate for funds," said Villafranca. "Unfortunately, some people only realize that they've lowered their credit score after they apply for a mortgage and are penalized with a higher interest rate."
Finally, some people transfer a balance from one credit card company to another to take advantage of a low interest rate (say, 2.9 percent) or even zero-percent interest on the balance transferred, but they may end up paying more in other charges than if they had stayed with their old card.
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Fall 2006 |
No Trivial Pursuit |
Not Checking Up on Your Account |
Not Considering Bank Fees | |
FDIC Consumer News is published by the Federal Deposit Insurance Corporation
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Last updated on 11/08/2006