Having a credit card problem? Here's help

The bank just lowered my credit limit. Can they do that?
Yes. And they don’t even need a good reason. All they have to do is give you 15 days written notice. That lower credit limit can have a dramatic impact on your credit score because it changes your debt-to-credit limit ratio. “It looks like you’re using more of your available credit,” notes Greg McBride, senior financial analyst at bankrate.com, “even though you didn’t put an extra dime on that card.” If this happens, contact the credit card company and try to get the limit raised.

Is there any downside to running up charges that come close to my credit limit, as long as I don’t go over it?
Yes.  It could hurt your credit score, which could result in a higher interest rate. The lower you can keep your balances, the more it helps your credit score. Experts say you are asking for trouble if your balance exceeds 30% of your credit limit.

What is the best way to pay off the balances on multiple cards?
Make at least the minimum payments on all of your cards. Then pay whatever extra you can afford on the cards with the highest interest rates. Don’t assume you know the annual percentage rate on each card. Check your latest monthly statements. For various reasons, the interest rate could be higher than when you first got the card.

Should I cancel old credit cards that I no longer use?
No. It seems like the logical thing to do, but if you close old accounts you may lower your credit score. Two of the factors used to calculate that score are history (how long you’ve had credit) and debt-to-limit ratio (how much of your available credit is being used).

Closing an old account can shorten your credit history and increase your debt-to-limit ratio. Both will hurt your credit score.

“Leave them alone unless there is a compelling reason, like an annual fee, or a child who is a co-signer and might go on a spending spree,” says Gerri Detweiler, credit advisor for credit.com.

Here’s an important tip: use every card at least once a year to keep the account open. Banks don’t want inactive accounts and they are aggressively closing them.

Do I need to sign my credit card?
Yes. That card is not valid unless signed. Visa and MasterCard require a clerk who is handed an unsigned card to ask for picture ID and have the customer sign the card on the spot. Otherwise, the transaction should be refused.

A lot of people think they can reduce the risk of fraud by writing “See ID” or “Ask for ID” on the back of the card rather than signing it.  This does not negate your responsibility to sign the card and it does not obligate the clerk to request ID.

How do I shop for a new card?
You can compare cards at Bankrate.com, CardRatings.com, Credit.com and LowCards.com. LowCards.com has a new interactive card index that lets you compare virtually every card in the country sorted by interest rate, annual fee, or grace period.

More informtion

• Choosing A Credit Card: The Deal is in the Disclosures
• Consumer Action: 2008 Credit Card Survey
  

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