No Good Deed Goes Unpunished

If you haven’t heard a word about all the changes that have been going on in the credit card industry, you’ve probably been living under a rock…That and you haven’t come in to meet with your advisor in over a year! Some people haven’t paid much attention because they don’t think they will be affected by the changes, but you might be more vulnerable than you thought:

· So you planned to stop using your credit cards altogether to avoid fees? Not necessarily. Many cards have instituted inactivity fees, so if you go too long without using your card, don’t be surprised to see a charge on your statement. Also, if you don’t charge enough in the year, there might be a fee for that, too.

· Maybe you’re a person who pays off your balance consistently every month? You might not be exempt in this either. Credit card companies are desperately seeking ways to fill the revenue streams that they’re losing, and that means instituting fees for just about anything they can get away with. Also, watch your due dates! You don’t want your due date to get moved up and you inadvertently miss the payment.

· Some people might choose to take it to the extreme and cancel all of their credit cards (or even just a few). While this might feel like you’re doing something good, beware! 45% of your credit score has to do with the length of your credit history and the mix of how much you owe compared to how much credit you have available. If you cancel a credit card that you’ve had for 20 years, you could be doing serious damage to your credit score. Don’t worry so much if you’re just closing store brand credit cards. Just make sure they aren’t carrying a major credit card logo like MasterCard or Visa.

Keep these things in mind as we come closer to the day in February when these reforms take effect. Be sure to read ALL correspondence from your credit card company, even the fine print.

Amanda Bashore, CFP
arbashore@taaginc.com
http://www.taaginc.com/