Dos and Don'ts of Using Credit Cards in the Downturn

>> Give banks a few billion of taxpayers's dollars, and what do they do? Turn around and raise interest rates and lower credit limits on some of those same taxpayers. Now, in some ways, this is no surprise. Banks are as hard up for revenue as everyone else these days. The surprising part is that some of the tightening moves are putting the squeeze on some of the banks' best customers. People who good payment records and reasonable borrowing practices. Want to avoid an unpleasant surprise from your card issuer? You already know the answer. Pay off your balances, use debit as much as possible. Pretty basic. But if you have a balance that you can't pay off just yet, there is some advice for staying on the good side of your card issuer. First, know your terms. Capital One, for example, is doubling interest rates for some customers who've never missed a payment. Their crime: high balances. Typically above five grand. Keep below your bank's threshold, and you're fine. Other lenders are quietly cutting credit limits. That can make a manageable balance look like it's maxed out, and that could crush your credit score and cause other issuers to raise your rate. Best idea: read the fine print. Check recent statements for changes in terms, and attack any balances that are suddenly out of line. That might mean transferring debt to another card. One thing you should not do though. Don't empty your emergency fund. The old wisdom said bailing out of a high-rate card balance beat earning a pittance in a bank account, but that was before the recession hit. You may need a raining day cash stash these days. So pay down as much of your debt as you can, but don't burn through your savings to do it.

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