Take control of your credit situation

As Congress debates whether a stand-alone consumer protection agency is needed as part of a financial reform package, it's clear that consumers need to do their own homework to keep themselves out of trouble.

We agree with President Obama that the creation of a consumer protection agency is needed to regulate credit cards and mortgages. It's clear that existing regulators fell short of protecting consumers during the financial crisis.

"It's in nobody's interest to lend people money they can't afford to repay," said Kathleen Day of the Center for Responsible Lending in a recent Associated Press story. "If the economic crisis we're in now doesn't underscore that for lawmakers, what will?"

Until that happens, though, there are still many pitfalls to be wary of.

The credit card industry reforms that went into effect this week do go a long way in providing needed information to consumers about credit card fees and interest rates. But as Daily Herald staff writer Anna Marie Kukec pointed out, the law led many credit card companies and banks to increase interest rates and fees before the law took effect.

"I received a letter stating that because of not using my card, the interest rate was increased to 17 percent," said Lynda W. Reilly of Naperville. "That sure won't make me want to use that credit card."

But, Kukec reports, financial advisers say people should keep their current cards and use them regularly to avoid such fees. That's just one of several pieces of advice we urge all credit card users to heed:

Pay off the highest rate cards first;

Make at least minimum payments on all cards;

Read everything you receive from the credit card company - they are required now to tell you how long it will take to pay off that card under the minimum payment and how much interest you'll actually pay;

Be wary of special offers and rates. While marketing to college students is now restricted, credit companies still can offer freebies and enticements to potential customers.

Meanwhile, an Associated Press story this week also warns consumers about the other kinds of credit not covered under the new reforms that will cost them dearly in fees and high interest rates if they choose to go that route: payday loans, prepaid cards and subprime credit cards.

Finally, this advice from financial adviser Mark La Spisa gets to the heart of what we all should do: "Use credit cards for needs, not wants. Go back to what our parents use to say, 'If you can't pay it off when the statement comes in, then you should not be using the credit card. Obviously, emergencies ... would be exceptions."