A Congressional study released in October revealed a large increase in credit card fees and that disclosures offered poor explanations about the fees. Over-the-limit fees jumped from an average of $13 in 1995 to $31 in 2005. The study reported that 13% of active US accounts paid an over-the-limit fee last year.

“Even though credit card disclosures are difficult to read, cardholders need to educate themselves and to understand the terms of their credit card. Not understanding all of the terms of a credit card can be costly,” says Bill Hardekopf, CEO of LowCards.com. “One of the easiest places to start is the credit limit, yet 13% of cardholders paid a high fee for exceeding the credit limit last year. Even worse than the late fee is the default rate of over 30% that you may receive if you go over the credit limit. These can be avoided if you understand what your credit limit is, how to easily monitor your credit limit, and how you can control your credit limit.”

The credit limit is the maximum total amount–for purchases, cash advances, balance transfers, fees, and finance charges–you may charge on your credit card. The limit is determined by credit score and payment history. The better your score and history, the higher your credit limit will be. Credit limits range from $200 to 50,0000 or more.

“Credit limits are an indication of how the credit card issuer judges your credit-worthiness and their assumption about how you will use their card. The opinion and credit limit may vary by issuer. You may even get different credit limits from different issuers,” says Hardekopf.

The credit limit you receive with your credit card is not fixed forever. The issuer regularly monitors your account; if you build a good credit history and pay on time, you may request a higher credit limit, or the issuer may automatically increase your credit limit. To request a higher limit, contact your issuer. You will have to provide income information and employment details, as well as information on assets and liabilities, loans, and other credit cards. They should be able to do this without pulling your credit report. If they have to pull your report, they should let you know first.

However, if the issuer automatically increases your credit limit, this does not mean that you can afford it. This is not like receiving a raise, and it doesn’t give you permission to spend more. If you carry a balance, a higher credit limit means the opportunity to increase your debt balance and the amount you will have to pay them.

“Credit card companies positively promote credit card increases as the freedom to buy the things you want, when you want. However, if you already carry a high credit line increases. You don’t need to add more debt, you need to pay down what you have,” says Hardekopf. “Just contact the issuer to decline it.”

Issuers may also decrease your credit limit. They not only monitor the account you have with them, but the accounts you have with other creditors. If you pay late, bounce a check or get a big loan, your credit card limit may be lowered. They should notify you about the new limit, but it is a good idea to look at your credit limit and balance each month to make sure nothing has changed, and to make sure you are well under the limit.

It is a good idea to leave plenty of room in your credit line. Credit utilization is important to creditors, and it is a large factor in 30% of your credit score. This is the formula for calculating credit utilization: total amount of debt on credit cards and revolving accounts divided by the total amount of debt available on those cards. The lower the fraction, the better your score. For example, if you have $3,000 in debt and $10,000 in credit lines, you are using 1/3 of your available credit. It is a good idea to keep your debt at about 30% of your credit limit. If your score is 1, you have maxed out your credit cards.

Don’t assume that your card will be declined if you go over your credit limit. Many issuers will allow you to make purchases beyond your credit limit, but you will have to pay a high fee for it. Many issuers now offer email updates when you are nearing your credit limit. Sign up for this because it is a good way to help monitor your activity.

LowCards.com ( http://www.lowcards.com ) is an independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over six years.

A new study shows that penalties for late fees on credit cards have more than doubled in the last decade. The average late penalty in 2005 was $34, up from $13 in 1995. Other penalties have also increased or have been added according to an analysis of credit card disclosure and fees by the US Government Accountability Office (GAO).

“Consumers need to understand that the late fee is expensive–the highest fee is now $39, but it may be accompanied by a bigger problem because issuers such as Chase can increase your interest rate to the default rate of 32% after just one late payment,” says Bill Hardekopf, CEO of Lowcards.com. “This punitive policy is described in the disclosure, but you have to look for it and read it several times to actually understand the consequences.”

Here are some interesting findings from the study:

–In 2005 more than one-third of US accounts received a late fee at least once.

–11% of active credit card accounts have penalty rates above 25%. This is more than double the 5% of accounts paying these high penalty rates at the end of 2003.

–Issuers reported that they assessed over the limit fees in 13% of active accounts in 2005.

–Of the 28 popular cards analyzed in this study, 74% offered a low intro rate, a two-fold increase from the 37% in 2003.

–In 2005, 93% of cards surveyed for the study had a variable interest rate.

–Almost half of all active accounts paid little or no interest because the cardholder paid the balance in full

–In 2005, consumers held more that 691 million credit cards, an average of 2 per household. The total value of transactions using the cards exceeded $1.8 trillion.

The GAO study also shows that card issuers have done a poor job of clearly communicating information about fees and policies to cardholders.

“This study correctly points out that credit card terms and conditions are too complicated. The disclosures don’t clearly explain terms like ‘two-cycle billing’ that can be expensive for cardholders,” says Hardekopf. “This is one of the purposes of LowCards.com–to simplify the fine print, to point out costly practices like ‘two-cycle billing,’ and to make it easier for consumers to understand the terms of the card before they apply.”

The study also listed fees that are costly but are typically not included in the disclosure. Consumers need to be aware that issuers usually charge for services such as telephone payments and duplicate copies of credit card records.

LowCards.com ( http://www.lowcards.com ) is an independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over six years.

Many Households Must Cut Spending to Pay for Growing Housing Costs

On Tuesday, the Census Bureau released statistics confirming what many consumers already knew–the cost of housing is consuming more and more of their monthly budget. Across the country, real median home values soared 32 percent, according to new 2005 American Community Survey data released by the U.S. Census Bureau. The number of homeowners spending at least 30% of their gross income on housing
grew from 27% in 2000 to 35% in 2005. For renters, it increased from 37% in 2000 to 46% in 2005. At the same time, wages and income have remained the same.

“This study is creating a stir because the 30% figure of gross income spent on housing is the tipping point. Many households can get by at 30%. However, if it grows much more, many Americans will have to stop saving for retirement, college, and emergencies just to keep a roof over their head,” says Bill Hardekopf, CEO of LowCards.com.

The growing shortage of affordable housing in many areas indicates that this is a long-term problem with no easy solution or creative financing magic.

“Households must have a budget and a realistic view of their finances to know what they can afford. If housing costs are increasing, they will have to cut spending in other areas,” says Hardekopf. “Our concern is that a greater number of households will be forced to use credit cards just to make ends meet. This may help in the current interest rates while stretching to pay household costs is just mixing ingredients for financial ruin in many households.”

For households on the edge, it only takes an emergency auto repair or a child’s medical bill to cause serious financial problems. When a credit card goes over-the-limit once, or a payment is late, the apr rates can jump to sky-high default rates not only for that card, but possibly all other credit cards as well. The default rate is punitive with some cards now charging 32.24%.

Here are a few suggestions to help cut costs:

-Get the lowest interest rate possible on your credit cards. If you can’t pay off your balance each month, try to get a lower rate. The average APR is close to 14.9%. If you have a good payment history and your APR is over 12%, call and ask for a lower rate. Requesting a lower rate is fairly simple, even if you don’t like negotiating and this seems out of your comfort zone. Simply call the number on the back of your credit card or bill. Tell them your name and that you have been
a good customer but you would like a lower rate. You have received several offers with lower rates in the mail and have researched cards with lower rates online. You want a lower rate on your card or you will switch to another card with a lower rate–what can they do to help? Here is a comparison of credit cards with low interest rates: LowCards.com.

-If you carry a balance, take advantage of a credit card with 0% for 12 months for balance transfers and use this time to pay offer your balance. This is a smart move for consumers, but shop around now because card issuers are making changes to these generous offers. Here is a comparison of cards with low intro rates: LowCards.com/bestintrocards.asp

-If you are house hunting, consider using a buyer broker. They work for you, not the seller, and can often negotiate a lower sale price. However, find out if they are showing you a property that they have listed through their firm because there may be a conflict of interest.

- Shop around for homeowner or renter insurance. Your state insurance department can provide a list of typical prices charged by different licensed companies. Call several of the insurers with the lowest rates for price quotes.

-Ask your electric or gas utility provider for a home energy audit. Most companies will do this for free or for a small charge. An energy audit can identify ways to save up to hundreds of dollars a year on home heating, cooling, and energy use.

-Periodically analyze your phone bills from the previous three months to review your telephone usage. Compare phone providers in your area, including wireless and cable, to find the best rate plan for your calling needs. Consider a bundled package or a VOIP provider that offers local, local toll and long distance, and possibly other services, if you heavily use all the services in the bundle. SaveOnPhone.com provides a comprehensive comparison of long distance, cellular and VOIP services.

-Check your phone bill to see if you have optional calling features or additional services, such as inside wire maintenance, that you don’t need. Each option you drop could save you $40 or more each year.

Choosing a Rewards Card

….and Bill Hardekopf, chief executive officer of LowCards.com, another comparison Web site, say they prefer cash-rebate cards, in part because they’re easy to use. Instead of you having to figure what your points are worth and how to redeem them, cash-back cards automatically add a rebate to your credit-card bill, usually once a year….