Last Minute Interest Rate Hikes – Many credit card companies sent out notifications detailing higher interest rates and other terms in advance of the new credit card laws. Some of these notifications may be confusing to consumers, due to the fact that the listed changes may not take effect for several months. Here’s the bottom line: if you received a notice of a change to your credit card’s terms before August 20th, you only have 15 days to opt out, even if the proposed changes don’t take effect until months later. Don’t wait to take action, and be sure to read the fine print in order to avoid having your account closed, or assessed additional fees.

Changes to Minimum Payments – Some credit card companies are also raising the amount you have to pay each month if you carry a balance – up to 5% from the typical 2-2.5% seen in years past. While you can’t always opt out of these changes, in some cases you may have the option to write in and retain your old rates. Be careful with this option, however, as some companies will close your account if you opt out of their new terms.

Increased Penalties for Late-fees and Over-limit Fees – While these types of penalties are easy to avoid if you pay your bills on time and stay within budget, credit card companies are also reducing consumers’ credit limits without providing any notice. Because the credit card companies aren’t required to inform you about changes to your credit limit, you could rack up over-the-limit fees without realizing it until your statement arrives in the mail. Your best defense against this is to sign up for alerts that will let you know when you are approaching your limit, coupled with regular vigilance through online access or customer service, so that you always know your limit before you go shopping.

Another way to avoid paying extra: Opt out of over-limit purchasing altogether.  Companies are now required to allow you to do this, but you will have your credit card declined for any purchase if that purchase would take you over the limit. If you typically keep your balances low, but aren’t sure about your credit limit, this is one way to avoid getting hit with additional fees.

Most credit card companies allow for automatic payment of your bill, either in full or the minimum balance, monthly. By taking advantage of these programs, you can eliminate the chance that you’ll be charged a late-payment fee on your accounts as well. Just keep track of your due dates and be certain that you have the funds readily available to cover the automatic bank draft, or you could wind up paying just as much, or more, in overdraft fees from your bank.

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Amongst the circumstances that could cause you to be flagged for a higher rate, high balances on other cards, along with having an adjustable rate mortgage are two of the most common. So what can you do to protect yourself from an unexpected increase? While there is no guaranteed prevention plan, there are some measures you can take that will help to minimize the chance that your credit card is subjected to these harsh new penalties.

Minimize your balances – if you carry a high balance on one card, that credit card company may consider you to be a risk of default and may lower your limit and increase your rates, even if you’ve been paying on time. This in turn can cause a spillover effect, wherein your other credit card companies follow suit, reducing the limit and upping the rates on cards you barely use. The solution? Carry a smaller balance across all of your cards, rather than a high balance on only one. In this way, you have an active account, but the balance is small, which can be seen as less of a risk.

Pay more than the minimum – if you consistently pay more than your minimum balance, there is a chance that your credit card company will see you as a better risk than those who are only making their minimum payments. If you can afford to pay more each month, do so – not only will it help to keep you out of the ‘high-risk’ category, it will also save you money on interest.

Read your credit card terms – many credit card companies have updated their terms of service to include language that allows them to raise your rates and lower your limits if you are late for even one payment. And late may be defined as 12:01 AM on the due date or the day after. Make certain you know what your terms are, and be prepared to negotiate if you feel you aren’t being treated fairly. If you’ve been a steady, good-paying customer for years, some credit card companies may be willing to negotiate better terms. If not, then you may have to adjust your spending accordingly.

Credit card companies have always been business first, and the consumer now, as always, must be prepared to take proactive steps to build and maintain positive credit, regardless of what the credit card companies decide to do.

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Universal Default

You may notice that if you miss a payment by even a few days with one credit card account, your other credit cards will revert to a default rate. This is what’s termed ‘Universal Default’ and some credit card companies use it to trap you into higher interest rates. After all, it’s almost certain that you’ll be a little late at some point, and this allows the credit card company to make a bigger profit, even if you aren’t late making payments to their company in particular.

Unfortunately, the only thing you can do to avoid universal default if it is a part of your credit card agreement is to pay all of your credit card bills on time, every time. A better bet is to look for a card that doesn’t have this stipulation in the agreement, and transfer your balances there.

Interest on Late/Overlimit Fees

Some people do not realize that if you are charged a late fee, interest accrues on the fee as if you made a purchase. This essentially means that you are charged more for each time you go over your limit or are late on your payments – and the interest continues to build month to month, so that it becomes more difficult to keep your balances down and avoid more fees and damaging notations to your credit report.

Double Cycle Billing

Double cycle billing is another financial ploy that many credit card holders do not realize is working against them. Essentially, double cycle billing charges interest twice on the same purchases, if you make a partial payment to bring down the balance without paying it off entirely. For example, if you had a zero balance on your card and you made a purchase of $1000 dollars, paying $400 when the bill was due should mean that you would only have interest charges on the $600 that’s left on your bill. This is true with cards that use conventional billing. However, with double cycle billing, you would actually have interest on $1600 the next month. The initial interest would be charged to the $1000 purchase you made, and then additional interest on the $600 balance remaining on the card.

This is another of those instances when it pays to shop around and read the fine print. Be certain your grace period for purchases is spelled out, and if not that the actual interest charges are not double-billed.

“Courtesy” Overdraft

Many times, credit card companies will allow you to keep charging on your card, even if you are over the limit. This means that if you don’t keep a close eye on your balances, you could be charging up a fortune in overdraft fees. While this type of ’service’ is usually called a ‘courtesy’ overdraft, it is actually a disservice that hurts your credit score and makes it difficult for you to obtain more credit, as well as making it difficult to pay off what you already owe.

One of the easiest ways to avoid courtesy overdraft is to set up a reminder that will alert you when you are nearing your credit card limit. Be sure to set the alert at a reasonable amount: $100 to $200 left on your card should give you plenty of notice so that you don’t overspend unknowingly.

If you pay careful attention to the terms on your cards, and plan your credit card purchases accordingly, you can avoid falling into the traps that credit card companies set in order to take more of your money each month. Shop around for fair cards that don’t use deceptive billing practices and you’ll be well on your way to avoiding woes due to fine print.

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