Often between 20 and 28 percent, default rates are a cardholder’s worst nightmare. Not only can they easily double the amount of interest you pay each month, they make it that much harder to pay off your balance. Both Bank of America credit cards and Discover credit cards now charge default interest rates of over 30%.

Avoid default interest rates

To avoid being hit with these outrageous fees, pay your credit card on time. If you’re having trouble, call your credit card company before you’re late. Forgot to call? Call them anyway, and ask them to reduce your default interest rate, which many will, especially if it is your first time being late.

What to do if you’re late

Finally, if you are consistently late on your credit cards, consider getting professional debt help from a company like Care One Credit Counseling. Though not for everybody, these companies can often negotiate lower interest rates (and lower monthly payments) with all of your creditors.

Maybe you were late with a payment, or you exceeded your available credit limit. Sometimes, credit card companies can drop your limit even if you are current with that card, but if you became late or overextended on another credit card or loan.

Although it is rare, credit cards may drop your credit line for no apparent reason at all if the credit card company is reorganizing its accounts. The bank may suddenly decide that a new, lower, limit is better suited to your credit risk.

Although a credit card bank should notify you in writing before reducing your credit line, they may not have to. If you notice a credit line reduction on your account, contact customer service and inquire as to why. Sometimes making a simple change such as updating the annual income the credit card company has on file for you can be enough to reinstate your full credit limit.

The bill aims to protect cardholders from numerous common credit card lending practices that result in getting consumers into debt (and keeping them there). The bill is trying to:

• Protect cardholders against arbitrary interest rate increases
• Prevent cardholders who pay on time from being unfairly penalized
• Protect cardholders from due date gimmicks
• Shield cardholders from misleading terms
• Empower cardholders to set limits on their credit
• Require card companies to fairly credit and allocate payments
• Prohibit card companies from imposing excessive fees on cardholders
• Prevent card companies from giving subprime credit cards to people who can’t afford them
• Require Congress to provide better oversight of the credit card industry

Specific credit card practices that are addressed by the bill include:

Banning universal defaults. This is when a credit card increases your interest rate because they found information on your credit report on another unrelated account.

Consumer-defined credit limits. The bill would give cardholders the right to set a credit limit and make the credit card enforce that limit, rather than allowing you to exceed the limit and charging you overlimit fees of $40 or more.

Interest rate freezes. In the event your card’s interest rate is going to go up, this protection would give consumers the ability to close their account and lock in their current interest rate until their balance is paid off.

Elimination of low interest first repayments. Credit cards make huge money by giving you a 0% balance transfer offer. How? Because when you make new charges at the regular interest rate, even if you think you are paying those charges off in full each month, the payment is actually being applied to your 0% balance, and finance charges are accruing on your new charges.

I imagine this bill has a long way to go before it is passed. The credit card industry has deep pockets and will undoubtedly pull out all the stops to limit the scope of this bill or kill it all together. I really hope not.

Your credit score tells lenders how likely they are to earn a return on their investment of lending money to you. The higher your score, the safer a bet you are for the lender, and the lower interest rate you’ll get. The lower your score, the more wary lenders are of giving you money, and the higher the interest rate they will charge you.

To give you an example of how this works, let’s take a look at an example of 30-year fixed mortgage rates. For the most qualified borrowers with a FICO score of above 720, the interest rate is 5.845%. In the middle of the road, somebody with a credit score of between 620-674, the rate is 7.658%.

At the bottom, those with credit scores of under 560, could pay 12.985% (assuming they can get a mortgage, which is highly unlikely these days). The difference between interest payments made by the well qualified borrower and the unqualified borrower, over 30 years? More than a half a million dollars.

If that’s not a reason to get your credit score in shape, what is? If you’re curious, you can get your free credit report and score.

Opt Out Screen wills stop most incoming credit card offers, although a few may still get through. That’s because Opt Out Prescreen only stops credit solicitations that are based upon your credit report. Signing up on the website will opt you out of credit card offers for five years. You can also opt out forever in writing.

The majority of consumers would have preferred the opportunity to opt out of receiving the new credit card.

If you receive an unsolicited credit card offer that you do not want, do not activate the card by calling the 800 number affixed to the credit card. Immediately call the issuing company’s customer service number to tell them you do not want the card and to cancel your account, then destroy the card.

Credit cards that are not activated will not appear in your credit report, but any card you do activate, even if you never use it, will appear on your credit history and could affect your credit score.

The Fine Print

In fact, most no pre-set spending limit credit cards come with a credit limit. The card then gives the card holder the ability to exceed that credit limit in some instances if the amount of the balance over the credit limit is paid in full before the due date.

That means that credit cards with no pre-set spending limits will authorize each purchase on a case by case basis. Whether or not they authorize a particular transaction will depend on multiple factors including your account history, your current balance, your credit history, you income, and your financial assets.

Avoiding Your Limit

If you plan to make a big purchase on your no pre-set spending limit credit card, you may be in for a surprise, as the transaction can be declined.

To avoid an embarrassing situation, it’s best to call your credit card company prior to making any unusually large purchases or any purchases that will put you over your credit limit.

You can also negotiate a higher spending limit after using the credit card for a year or more. Your chances of getting a credit limit increase will be best if you charge a significant amount on your card each month and pay the balance in full. You’ll also need a clean credit history.

Compare and apply for no pre-set spending limit credit cards now.