Credit Card Caution

John Carmichael says he always made his credit-card payments on time and had never had problems with his credit rating. But earlier this year, the interest on his Bank of America Visa card nearly tripled overnight. From around 8% to nearly 25%! Carmichael, "To jump from a low rate to a high rate in one fell swoop, with no justification in something that I did wrong, I think is bad business."

Bank of America says Carmichael had too much debt, even though his card balance was almost $1,000 below his limit. Carmichael speculates that banks are changing credit-card terms to compensate for their mortgage-related losses. Consumer Reports Chris Fichera says that's possible: "Banks earn a large part of their revenue from credit cards. So when the mortgage meltdown hit, they turned to credit cards to make up for slacking profits."

Credit-card notices alert you to changes in your account. Although plenty are junk mail, don't toss out a notice without reading it. Otherwise, you could miss important changes to your credit-card account.

Banks often give you the choice to stop using your card and pay off the balance at the old rate, which is what John Carmichael worked out with Bank of America to avoid a rate increase. But not everybody does that. Consumer Reports Chris Fichera warns, "Some economists fear that overextended credit-card holders could be the next shoe to drop in the economic crisis. With home-equity loans harder to get, some people are turning to credit cards to cover their expenses."

Consumer Reports says with so many banks changing their terms, you need to navigate this new credit-card jungle with care.

If you're not happy with your credit-card terms, make a switch. You can compare cards online at sites such as or Look for a card with a low interest rate and no annual fee. And always be sure you read through the card's terms and conditions before signing up, so there are no surprises later on.

Even if you haven't had credit-card problems, review your accounts to make sure you're getting the best deal. Compare your cards' terms with those of the 12 best cards Consumer Reports found, with the help of

Download Consumer Reports Top Picks


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