EDITORIAL: Credit card diet

As holiday credit card bills come due, many people from this part of Minnesota and across the nation are seeing higher fees, higher interest rates and higher minimum payments on monthly statements.
The debt “hangover” consumers feel this time of year is real. Digging out of this debt might seem daunting. But, by learning the strategies of the credit card companies and options to avoid higher fees and interest rates, cardholders can begin following the first rule of holes: Stop digging.
Although we favor the market to solve problems in private-sector businesses, we also believe this revolving debt epidemic is severe enough to require Congress to step in. According to Cardweb.com, consumer revolving credit hit a record level of $873 billion in November, and is growing at 11.9 percent a year. Rising fees and interest rates are contributing to this growth.
A “60 Minutes” story revealed that a contract law attorney was unable to understand the fees and interest rates printed in a typical credit card contract. “60 Minutes” also reported an old cap on credit card fees was removed. And, credit card companies are raising interest rates without the customer knowing it. Rates are raised when a cardholder is late on a bill for an unrelated debt, such as a car payment.
It is possible for consumers to avoid these problems by:
• Shopping around for a new credit card. Consumer Reports offers a ranking of credit cards by interest rates and fees. The report is free to Consumer Reports subscribers, but costs a small fee for non-subscribers.
• Paying the bill when it arrives. Some credit card companies send out bills that are due within only a week or two, not 30 days. Paying it right away will avoid high late fees. If a payment is not promptly credited – a criticism by some customers – call customer service to prove its timely payment.
• Watching the monthly statement for any extra fees or an increase in the interest rate.
To dig out of credit card debt, the Consumer Credit Counseling Services – a nonprofit United Way agency – advises consumers to:
• Create a damage sheet with the names of creditors, amount owed, and interest rates. Refer to it as payments are made.
• Shelve credit cards. Leave credit cards at home near the damage sheet. And, avoid charging anything new that can’t be paid in full within 90 days.
• Establish a holiday account at an area bank. A direct deposit from each paycheck can begin to build a nest egg for next year’s holiday expenses.
• Spend only cash.
As self-service swiping machines arrive at store check-out counters and online purchases continue to grow, use of credit cards is also growing. More of the total economy is moving from cash to electronic transactions, and fees are adding up. Congress should require companies issuing credit cards to disclose terms in plain English and consumers should shop these terms around.
Until that happens, cardholders can make smart choices and go on a revolving credit diet.