When it comes to credit cards, you can be your own consumer advocate… or your own worst enemy. And these days, this lesson couldn’t be more important.
According to TransUnion, one of the major credit bureaus, the number of new credit accounts grew by 14 percent in 2011, including subprime credit.
While I’m glad that subprime consumers are able to get back into mainstream credit, be careful. You’re likely to get a high interest rate, so don’t carry a balance. And I hate to sound skeptical, but even though the CARD Act is in place, there are still plenty of ways for banks to take advantage of consumers.
Since so many people seem to be rediscovering credit cards, it’s a good time to look at ways you can protect not only your credit, but your hard-earned cash as well.
[Free Resource: Check your credit for free before applying for a credit card]
1. Speak up if you’re unhappy
For this to work, you need to stay under your credit card limit and pay your bills on time. Then you’ll have leverage when something unpleasant—like an interest rate increase—happens. If you get whacked with a high rate and you’re an exemplary cardholder, call the issuer and state your case.
Likewise, if your annual fee goes up, call and ask them to waive it. Tell them you’ve been an awesome customer. You’ve got offers from other card issuers who are happy to have your business.
See how this is done? You can always advocate for yourself, but this strategy works best if you’re a top-notch customer. Speak up and you might be able to keep more of your cash where it belongs—in your pocket.
2. Keep tabs on your credit history
Every year, you can get your free credit report from each of the major credit bureaus—Equifax, TransUnion and Experian—on AnnualCreditReport.com.
You want to review the report and look for errors or any signs of fraud. An error can really bring down your credit score and that will cost you when you apply for a credit card or a mortgage. This is a simple, but very effective way to protect yourself when it comes to your credit life. Put it on your calendar, and every four months get a report from one of the bureaus. To keep tabs on your credit throughout the year, use Credit.com’s Credit Report Card for an easy to understand overview of your credit standing.
[Related Article: Can You Establish a Great Credit Score... Fast?]
3. Get your credit score
A FICO score is what most lenders use to gauge your creditworthiness, so that’s the score you want to look at. You can get your FICO score for $19.95, or you can compare other credit score monitoring products, but just make sure they offer a FICO score.
Credit scores go up and down constantly, so keep in mind that you’re getting a measure of what your score is at that particular time. Even so, I think it’s vital to check your score from time to time. This gives you an idea of your credit range so you know what types of credit cards you should apply for. Your score will get dinged if you repeatedly apply for cards that you can’t possibly qualify for. You can get an estimate of your credit score range for free with Credit.com’s Credit Report Card.
4. Be aware of the consumer protections your card provides
Many credit cards, especially those in the elite group, like Chase Sapphire Preferred, offer purchase protection and extended warranties. Purchase protection can have your back if your merchandise gets stolen or accidentally damaged.
Extended warranties on credit cards extend the manufacturer’s warranty and it varies by card. It’s not unusual for people to buy extended warranties when they already have it via their credit cards. Some credit cards even still offer price protection but this isn’t as common as it used to be.
How do you know what protections you have? It will be listed in the disclosure statements. If you didn’t keep them when they arrived in the mail with your card, get online and read the fine print. If you can’t find the information about these benefits, call your card issuer and ask.
5. Know the details of rewards programs
I review tons of rewards programs and I can tell you that some of them are the pits. Not that the programs don’t have great rewards, but they explain it in a convoluted fashion. Sometimes you even have to look at several websites to get the whole picture.
You can Google the card name with something like “rewards program” and see what pops up. Yes, it’s tedious, but it helps to know everything about the program so you can take advantage of it. The flip side, of course, is that there are also land mines in the details.
You want to make sure you read everything because you could find nuggets like, “If your card is inactive for 12 months, you’ll lose your rewards.”
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