Credit matters in tough economic times

AUSTIN (KXAN) - It is painfully obvious. Americans are under financial stress these days. With a possible recession looming, many Central Texas families are facing even more financial trouble: fine print nightmares from their creditors. Whether they are raising your mortgage payments or tripling your credit card interest rate, there are ways you can fight back.

"The average household debt in this country is over $8,300," said Bob Wolsey of Austin-based creditcards.com. "And you are looking at a total debt of $965 billion right now." Wolsey's company provides a variety of credit card offers online.

Even if you manage to pay your credit card bill on time you could find a shock in your next statement. "They can change your rate, based on what you're doing with other creditors," said Sally Borie with the Consumer Credit Counseling Service in North Austin. She said federal law requires credit card companies notify you of any changes to your agreement. "Often times that notification is included in the bill," said Borie. "It's small print. And basically what it will tell you is what the change is going to be, and if you don't agree with this, you can close your account."

The rate hikes are real financial pain. If you have an account balance of $1,000 at 15 percent and made only the minimum payment of $10 a month, you wouldd pay $577 dollars in interest. But if your interest rate doubled to 30 percent, your interest payment would balloon to $3,726.

"The credit card industry, quite frankly, is under siege," Wolsey said. He said card issuers review your account monthly, because these days banks are more risk-averse. "If you're late on your utility bill or some other credit card, your own credit card or particular credit card company can look at that behavior elsewhere and view you as a much higher risk and increase your interest rates and decrease your credit lines, even though your 'current' in your payments on that particular credit cards," said Wolsey.

There is another way fine print can take a bite out of your wallet. This one involves homeowners. If your mortgage company maintains an escrow account to pay your homeowners insurance and property taxes, there is a chance they may be taking out more than necessary.

Check the fine print on your mortgage for something called an escrow reserve requirement. It turns out it is not a requirement at all. Federal law allows your lender to withhold an amount 16.6 percent above the amount you pay for taxes and insurance. Yet, the overpayment is merely voluntary. If you are paying it, contact your lender and ask that the reserve be removed from your escrow. It is like money in the bank.

Complaints about credit cards can be made to the Texas Attorney General's Office on their Web site . The Consumer Credit Counseling Service in Austin can be reached via their Web site .

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