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Holiday Hazards for Credit Card Users :: A Timely Tip Sheet for Consumers from Americans for Fairness in Lending

Thursday Nov 20, 2008

Even in the midst of our nation's current economic slump, the average consumer is projected to spend $832 during this year's holiday season.

Many shoppers will use credit or debit cards to make purchases, while others will consider rent-to-own stores or layaway plans. Whatever the choice, Americans for Fairness in Lending, a non-profit organization working to end predatory lending practices and provide helpful information to consumers, suggests the following tips for avoiding the post-holiday financial hangover.

Credit Card Caveats

Avoid Seasonal Solicitations Beware of those attractive low introductory rates you receive before the holidays. The fine print in credit card contracts is filled with traps to catch the unwary. An introductory 0% interest rate can quickly leap to over 20% with just one slightly late payment. If you are going to use a credit card, shop around for one with a long-term low interest rate (APR), and read on to find out what you're in for.

Don't Let Your Guard Down Once you choose a card, your credit card company can still change the rules if it wants to. Read your mail - a nondescript mailing may include a change in terms relating to your interest rates, fees or due dates. The company can even change your interest rate on debt you've already accumulated.

Avoid Late Fees Pay your bill several days in advance of the due date to avoid sneaky late fees. If your due date falls on a Sunday and your payment arrives on Monday - surprise - you're late and your interest rate may jump to a much higher level!

Pay in Full Pay your bill in full whenever possible. This is good advice all year round.

The Gift That Keeps on Taking- Even if you find the perfect gift for Aunt Betty, it's not so perfect if it takes you over your credit limit. You'll get hit with an overlimit fee and a penalty interest rate that will keep you paying for many holiday seasons to come.

Costly Cash Advances Cash Advances are a Grinch's (and a credit card company's) best friend. The interest rates on this borrowed money are much higher than on purchases. In addition, the credit card companies apply your monthly payments to cash advances LAST so that the interest owed just grows and grows.

Don't Buy What You Can't Afford Even during the holidays.

In Trouble? Get Help If you do find yourself in serious trouble with credit card debt, do not delay. Get help immediately. Contact the Consumer Action Help Desk online at, or by phone at (415) 777-9635 or (213) 624-8327.

Rent-to-Own = Concealed Costs

Deceptive Deals Rent-to-own contracts for appliance and other major purchases are deceptive and costly. You could pay two and one-half times more for a product by renting it than you would if you simply bought it at a retail store. In fact, the rent-to own outlets don't even tell you how much of your monthly payment is interest - so beware.

Don't Miss a Payment If you do miss a payment to the rent-to-own store, the item is likely to be repossessed, leaving you with nothing for the payments you have made up to that point.

The Comeback of Layaway Plans

Paying Patiently Layaway plans are a good way to give your credit card a rest. The good news is that stores usually do not charge interest or large fees for this service.

Know the Details Before making a purchase on the layaway plan, find out what the layaway fees are and what happens if you miss or are late with a payment. Do you lose all of your past payments if you miss one? Is there a cancellation fee if you change your mind?

Debit Cards - The Pros and Cons

It's Your Money With a debit card, you are spending money in your own bank account, unlike a credit card where you are borrowing money that you have to pay back later, along with interest and fees.

There's Less Protection You have much less protection if a debit card is lost or stolen. Also, with a credit card, you have protections if you get in a dispute with a merchant.

Abusive Overdraft Fees If you use a debit card to make purchases, make sure you don't spend more than you have in your account. Your purchases may be approved, but the bank can hit you with an overdraft fee of as much as $39 for EACH over-limit purchase, no matter how small.

For holiday (and everyday) spending tips,and personal stories from AFFIL members about fighting predatory lending practices. go to


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