When you you receive your credit card statement every month, do you actually read it? If so, do you you know what to look for? Money Management International (MMI) wants to help you understand the fine print included in most credit card statements. They claim that reviewing your statement doesn’t have to be a daunting task. In fact, if you know what you’re looking for, it could be a simple task that takes less than two minutes.

Here are the three steps MMI suggests to help you navigate your credit card statement:

Step 1 - Look for the account summary.
If you have time for nothing else, look at this section to determine: your total amount owed, due date, and minimum payment amount. This section will also tell you your available balance — important to know so you don’t go over your limit — and the amount of your last payment, which is where you’ll want to make sure you were properly credited for your previous payment. Remember to review your transactions. This is important to help you get an idea of where you are spending your money and to keep an eye out for signs of identity theft.

Step 2 - Look for the finance charge information.
This is very important information because it dictates the cost of using credit. Generally, people are most concerned with their Annual Percentage Rate — usually listed as APR. Again, do not assume you know your APR. Your credit card might carry different interest rates depending on how you use the card. Interest rates fluctuate depending on economic conditions — even if you have not made a late payment on your card. Notifications by mail regarding changes in terms are required, so be sure to review every piece of mail sent by your creditors.

Step 3 - Know what’s in the fine print. 
You do not have to read all of this every single month. However, you should read it all at least once. And, if you have questions about anything you have read in your statement, you might find the answers in this fine print. Items usually found in the fine print include:

How to report your card lost or stolen.

Your grace period - or the amount of time you have before interest begins to accrue.

How to report errors found on your statement.

Purchase protections - some purchases over $50 might qualify for protection if you’re dissatisfied with the quality of your purchase.

“Even with all of this information, there are still a few things that may be left off your credit card statement that are worth knowing,” said Cate Williams, vice president of financial literacy for MMI. “To get to a deeper level of detail, refer to your original card member agreement or contact customer service.”

For more information about reading your statement, visit MMI’s personal finance blog - http://blog.moneymanagement.org/.

Image Credit: Andres Rueda, Flickr

According to a recent report, the delinquency rate on credit cards jumped more than 10% in the first quarter of 2009 when compared to the first quarter of 2008. The report, which was conducted by TransUnion, defines delinquency as credit cards that have had no payments for three or more months.

Credit Card Bill (Image: Flickr)

In 2008, the delinquency rate was around 1.2%. In 2009, that number jumped to more than 1.3%.

Well some industry observers were hoping for a decline on delinquency rates, this news doesn’t come to the surprise of most experts. With the national economic downturn yet to heal, consumers are struggling to make ends meet. When money runs out in a household, credit cards are usually one of the first items that go unpaid.

Compared to the foreclosure crisis, things are still relatively healthy in the credit card industry. That said, more and more credit card companies are looking at monetizing debit cards to offset loses elsewhere in their business models.

President Obama signed a credit card reform law that would protect cardholders from retroactive rate hikes and other less-than-scrupulous tactics, but this law does not apply to small business cardholders. This means that small business owners who rely on even a single credit card account will still be subject to the same tactics that the law aimed to limit.
 
The Credit Card Accountability Responsibility & Disclosure Act takes effect in February but it will only protect private cardholders. About 11 percent of all credit card purchases are made by small business credit cards, a number that has been on the rise in the past couple of decades.
 
Congress did see several attempts to include small businesses in the entities protected by the act, but all attempts were all shot down. The Federal Reserve will, though, have the authority to examine credit card usage by small companies and recommend protections as they see fit.

Image: Flickr

If you are looking to apply for a loan any time soon, it is worth noting that that lending standards have been tighter since just before the global financial crisis, and that many banks continue to tighten lending standards. MarketWatch reports on lending standards:

Large majorities of banks surveyed said they had further tightened requirements on borrowers for most kinds of business and consumer loans. The banks have been tightening lending standards for most kinds of loans for more than two years.

Most of the banks reported weaker demand for loans, and almost all said they expected more chargeoffs and delinquencies on bad loans in coming months.

It’s true that credit card companies and issuers engage in practices that many consider predatory. Happily, it’s also true that credit card rules changes are coming, one way or another. But in the end even forcing credit card issuers to behave in a more *ahem* ethical manner isn’t likely to completely change the way people use credit cards. After all, in the end we have to take responsibility for our financial decisions — perhaps even especially if we’ve made poor decisions.

Why are your credit card bills so high, anyway?

Today, Free From Broke pointed out that many of the problems we face with credit cards are results of poor financial habits. Sure, credit card issuers work hard to trick you into getting cards at low rates, only to jack them up. However, no one forced you to get the credit card. And, certainly, no one forced you to spend money and neglect to pay the balance off each month. Yeah, credit card minimum payments are meant to be low — to keep you paying for as long as possible and squeeze the maximum interest out of you. But you can choose to pay more than the minimum each month.

When I finished college with three nearly maxed out credit cards, I at first blamed the credit card issuers. What were they thinking, issuing cards to a freshman college student? Well, I know what they were thinking. My question should have been this: What was I thinking, using credit cards to buy things I couldn’t afford?

Yes, credit card tactics are sneaky and underhanded. And I really hate that they can just change the terms of the agreement on a whim, even if you are responsible. Those types of practices should be stopped. But, even more important to your personal finances, is taking responsibility for your credit card mistakes, fixing them and then moving forward as a more discerning spender.

image source: sxc.hu via Wikimedia Commons

One of the best things you can do for yourself is to get out of debt. But, since it’s financial literacy month, I think it’s also worth understanding how debt works. That’s why I found The Complete Idiot’s Guide to Getting Out of Debt so helpful.

Written by Ken Clark, a Certified Financial Planner, Getting Out of Debt offers real world information and help with debt. Using easy-to-understand, real world language — and drawing on personal experiences with debt — Clark takes the reader on an informative journey through the world of debt. The book tackles such concepts as where debt comes from, the different types of debt, cash flow and budgeting.

Getting Out of Debt isn’t just about the history of debt. Clark also helps the reader wake up to his or her possible debt problem, and create an action plan to get rid of debt. The book is full of worksheets and goal setting exercises. Additionally, Clark provides various strategies based on the kind of debt you have. He suggests that you tackle credit card debt differently from student loan debt or mortgage debt. Clark offers help hints and tips at the end of the book for staying out of debt and cultivating responsible money habits.

The books is arranged in an intuitive manner that makes sense and helps the reader progress in a naturally. Throughout the book are factboxes that include tips, warnings, definitions and information about debt in America. In the book, Clark points out that “debt for many becomaes an action, a cycle and a mind-set. Some might even call it a lifestyle.” For those in need of debt help, Getting Out of Debt can be a valuable tool in creating a new lifestyle without the use of debt.

image source: Penguin.com

One of the more interesting things that people are finding out as credit card issuers start closing accounts of those who are responsible with their credit is that issuers don’t actually want you to pay off your balance every month and use your card only occasionally. I was asked about this recently:

“I don’t understand why credit card companies care,” a friend said. “Don’t they get money on each transaction? Even if I pay off my credit card every month, or use it only occasionally, aren’t they making money even if I don’t pay interest?”

My friend has been caught in the common misconception that the company whose logo you see issues the card. While this is true of American Express and most Discover cards, the fact of the matter is that Visa and MasterCard are actually processing payments, not issuing credit cards. The card issuer — the bank or the credit union that set up your credit card account — earns money from the interest.

Payment processing fees

That 3% to 5% of the transaction that stores and other talk about when they say that part of your purchase is deducted actually goes to the payment processor. Visa and MasterCard have agreed to let certain issuers use their logos, and credit cards can easily be used around the world. But Visa and MasterCard do not get interest from your payments; they make money on the transaction fees they take for facilitating the transaction.

The only way for the actual issuers to make money, then, is to charge interest and fees. If you are not carrying a balance, the bank or credit union doesn’t make money off the loan it provides you. Discover and American Express are exceptions, because they have their own payment processing systems and issue their own credit cards.

Over at Contract Worker, Rico asks if freelancers should use credit cards. He tells a story on himself about how easy it is to spend more than planned with a credit card.

My hunch is no one should use credit cards unless they are independently wealthy, and even then, only if they pay them off each and every month. The fees and interest are outrageous. Whatever happened to usury laws? Thirty percent? With penalties if I’m late? That’s 30 cents on every dollar… no way, not for me.

It always seems worthwhile to actually look at how long it will take you to pay off a credit card debt. Lots of sites provide calculators. One of my favorites is at BankRate.com

Go ahead, check out your balance there and see how long it will take you making the payments your making now.

I’ve learned to save for what I want… an old fashioned concept, but it’s was so cool to know, when they delivered my new couch, it was paid for!

What do you think? Do you use credit cards? Are they working for you?

Write well and often,

Two newsletters:
Abundant Freelance Writing - a resource for freelance writers including 3x a week job postings.
Writing With Vision - for those who want to get a book written.

Image from http://www.sxc.hu