Suze Orman

Managing Debt

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Credit Card Companies Boosting Your Rate


Credit Card companies are watching every move you make, and that could cost you a lot of money. In the past the only thing you needed to do to stay in the good graces of your credit card company was to make sure your payment-even just the minimum balance due-was received by the due date.

But the game has changed my friends. You need to understand that it is no longer enough to treat your credit card with incredible care. You can send your payment in 10 days early, never go over your limit and generally act like a perfect Girl Scout or Boy Scout in how you handle the card, but that's not going to be enough to protect your interest rate.

Nowadays your credit card company is going to insist that you also have a perfect record with just about every type of bill you receive. Manage to be a day late paying the phone bill, the gas bill, your mortgage, or any other charge, and your credit card company will use that as an excuse to raise the interest rate on your account.

The industry term for this practice is "universal default." Credit card companies are monitoring your bill paying habits-remember it's all there to see in your credit report-and looking to see if you've tripped up anywhere. From their perspective they absolutely hate giving you a low interest rate, so they have plenty of incentive to get you to trip up. So that great zero percent deal you got on your $5,000 balance transfer to a new card could shoot up to 20 percent or more if you are a day late paying the $50 gas and electric bill.

As far as I am concerned, universal default is a universal disaster. It's just another way the money-hungry credit card companies are making a fat profit off of us. And yep, it's perfectly legal. Just another one of those insane rules and regulations buried in the fine print of those annoying small-print notices you sometimes get with your card statements.

But here's the deal: you are actually in the driver's seat. If you get your bills paid on time you won't run into this trap. My advice is to automate as many of your bills as possible. So you don't trip up on one of your recurring bills-such as utilities, cable, cell phone-sign up for online banking and automatic bill pay. And just be super careful with all your bills. Check the due date on each statement; it can change from one month to another, and that could inadvertently make you late with a payment.

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