NEW YORK (CNN/Money) -
In the world of credit cards, two things seem inevitable: year after year, Americans will take on more debt, and credit-card companies will find ways to charge them more for the privilege.
The typical U.S. household at the end of 2002 owed an average of $8,940, up 8.5 percent over 2001 and a 173 percent increase since 1992, according to CardWeb.com.
If you find yourself occasionally getting behind on your credit card payments, you might want to be a little more eagle-eyed about the credit cards you choose to use.
According to a survey released this week by Consumer Action, a nonprofit consumer advocacy group, credit card issuers continue to find ways to impose high penalty rates and late fees. And more issuers are only requiring 2 percent minimum payments -- which means those consumers who don't pay more than that every month may pay huge interest payments and be indebted for years to come.
Here's a look at five key findings from the 2003 credit card survey and what you can do to protect yourself from potentially costly policies:
Your reputation will follow you. Even if you have a perfect payment record with your credit card issuer, the company may still penalize you with a higher interest rate if you have a poor credit record with other creditors. That was the situation with 39 percent of the 143 cards Consumer Action surveyed.
If you continue to pay your bills in full and on time every month, a higher APR won't make a difference. But if you're paying less than your full balance, you'll end up paying more in interest over time.
What's more, card issuers are not currently required to notify you about a rate hike that's based on your credit record. So keep a close eye on your statement every month, pay all your bills on time and make sure you pay at least the minimum required on all of them, said Consumer Action executive director Ken McEldowney.
If you see a rate hike, call your issuer, ask why the rate was increased, request that it be reduced to its original level and threaten to take your business elsewhere if it's not.
Three more good reasons to be on time. With 76 percent of the cards surveyed, one or two late payments in a period of six months to a year triggered an interest rate hike in consumers' accounts. Penalty rates ranged from 12 percent to 29.9 percent.
And 62 percent of the cards charged late fees to cardholders if their payment wasn't received by the due date. The remainder allowed for leniency periods past the due date -- ranging from two to 10 days -- before a fee was charged.
Consumer Action also found that 29 percent of the cards surveyed imposed tiered late fees, a new practice since the group's last survey. Typically, there are three tiers based on a consumer's balance. The less you owe, the less you pay in dollar terms. But in percentage terms, you may pay a much higher price.
For example, the organization found that at Wells Fargo, consumers pay $20 late fees on balances up to $100, but $29 on balances between $100 to $1,000. So the consumer with a $99 balance will pay nearly 20 percent of his balance as a late fee, while the consumer with a $500 balance will only pay 5.8 percent.
Overall, the average late fee slipped a bit -- to $26.85 from $27.82 in the prior year's survey. Sixteen percent of cards (double the number from last year) charge $35; 30 percent charge $29; 12 percent charge $25 and 4 percent charge $20.
Can you feel the floor? Interest rates have been dropping like hotcakes for the past two years. But the average APR hasn't exactly followed suit. In fact, it is rising.
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This year, according to the survey, the average rate was 12.19 percent, an increase of about half a percentage point from last year's average.
Part of the reason is that credit card companies can set floors below which they will not allow their APRs to drop no matter how low the prime rate or other key index goes. (For more on why rates have fallen everywhere but your credit card, click here.)
Issuers make the least of minimums. The average minimum payment, Consumer Action found, was 2.38 percent, but more than half of the cards (53 percent) required cardholders to pay just 2 percent. That's up from 43 percent last year.
Whenever possible, you should pay more than the minimum, especially if it's only 2 percent. Otherwise, you'll potentially be in hock for decades.
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Consider the average U.S. household credit card balance of $8,940. If you paid just 2 percent on that every month and your annual APR was 15 percent, it would take you 29 years, 11 months and $13,059 in interest to pay off your balance in full, assuming you made no further charges.
(For a look at how long it will take you to pay off your debt, try our Debt Reduction Planner.)
Finally, a bit of good news. Annual fees are dropping. The survey found annual fees fell an average of 20 percent. Among the cards that charge fees, the average hit to the consumer was $35.67, down from $44.48 last year.
(For a look at Consumer Action's survey and the details on each card surveyed, click here.)
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