Credit Card Strategy

Gary North

Your credit card interest rate is affected by your credit rating. The four major credit-rating services get reports from companies to whom you make regular payments. If you miss a payment, and a company records this, this information becomes available to the credit-rating services.

The credit card companies can raise your rate unilaterally upon receipt of information from a credit-rating service of a downgrading of your account due to a missed payment. So, even if you pay your credit card bill on time, a late payment anywhere in your budget can cost you, big time.

Credit card companies offer low-ball rates, knowing that you will probably miss a payment sometime. Then the company has you trapped: up goes your monthly rate. You agreed to this when you borrowed the money.

Solution: make payments a month ahead of time on debts that have the same payment each month. I had my wife do this with our mortgage payment, the one long-term debt we have. In month one, she paid twice. Had she not done this, there would have been a late payment one month this year due to a mistake at our end.

Of course, we have no credit card debt, so missing one payment would not have mattered with respect to the card's interest rate. But it might have affected our credit rating negatively.