By Beth Kobliner, REDBOOK
Here's what credit card companies can and can't do-and what you must know to reduce your costs and protect your credit rating.
1. Don't take a hike. They can't raise interest rates on debt you've already racked up. The one exception: They can hike rates on these existing debts if your payment is more than 60 days late.
Your takeaway: You must pay on time. Every time.
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2. Get interested in your interest rates. If your card charges you different interest rates (say, 14 percent for existing balances, and 2 percent for balance transfers), they must apply your payments to the debt carrying the highest rates (i.e., the 14 percent) first.
Your takeaway: The faster and more you pay off, the more money you save.
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3. Be punctual or be punished. They can't raise your rates if they find out you've been late on other credit cards or loans.
Your takeaway: A slipup on one bill can no longer automatically trigger higher rates on other cards and loans. But it will hurt your credit score, which can eventually lead to higher interest rates and a tougher time getting credit and loans. Again, don't be late.
Related: 4 Things You Should Never Do With Your Credit Cards
4. Know your limit. You can no longer go over your credit limit-and be charged the subsequent fees-unless you notify your credit card company in writing that you'd like to spend more than your limit.
Your takeaway: Don't ever opt for the "right" to go over your credit limit; it's a costly convenience.
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5. Don't do the bare minimum. They will tell you-on your bill-how long it will take to pay off your debt and how much it will cost you, including interest, if you pay only the minimum each month.
Your takeaway: Get ready for a reality check. If you owe $5,000 at 16 percent interest and you make only the minimum payments, it'll take you nearly 18 years and $9,856 in interest to pay that off! Add just $20 per month to those minimums and you'd be debt-free in a little over eight years and have paid $3,922 in interest. Paying even a little more than the minimum will get you out of debt faster and cost you less in the long run.
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6. Make sure the underage don't get carded. Those under 21 years old won't be able to get a credit card unless they show proof of income or get an adult to cosign.
Your takeaway: If your teen is nudging you for a card, say no to cosigning. His or her slipup can mess up your credit score for years. After all, if your child wants spending power, he can get something called... a job.
Read more: Credit Card Debt - Get Out of Debt - Redbook
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Reprinted with permission of Hearst Communications, Inc.