Credit Card Bills: Tricks, Traps, Confusion

RESIDUAL INTEREST

Let's say you pay off a $1,000 balance you've been carrying. One might assume you're now debt free. But the following month, you get a bill for interest charges on that $1,000.

This is the phenomenon called residual interest.

What's happening is that interest continues accruing on debt in that window of time between when your statement was issued and when you make your payment. By the time you get your statement and submit the payment, you've racked up more interest.

One way to avoid residual interest is by paying off your balance in full each month, since this gives you a grace period in which you don't rack up any charges. Carrying a balance for just one month, however, can result in charges.

Another way to avoid residual interest is to check your statements online and pay off a balance as soon as a statement is issued, said Linda Sherry of Consumer Action.

Of course, this is not a realistic option for most.

PESKY MAIL

One consequence of convoluted credit card statements is that people have become accustomed to taking only cursory glances before tossing it in the trash.

In the past year, however, banks have sent out important notices about higher interest rates, lower credit limits and even account closures.

"The problem is that they end up in the shredder a majority of the time. People assume it's junk mail," said Ulzheimer of Credit.com.

Being oblivious to such changes comes with serious consequences. For instance, your FICO score could take a beating if you unwittingly use up a greater portion of your credit limit. Or you might count on a line of credit that isn't as deep as you thought.

"You don't want to get to a position where you find out the hard way that your purchase has been declined because of a lower limit," said Ulzheimer.