How to Avoid Paying Outrageous Credit Card Interest Rates and Late Payment Fees — Guaranteed!

A couple of weeks ago my wife and I were in Big Lots (don’t judge – they had an awesome sale on DVD box sets), and as we were walking around, we overheard the following conversation between a customer and an employee:

Customer: Where do I apply for the credit card where I get a free gift?

Employee: Right back there, but you have to be approved to get the gift.

C: (hesitantly) I have to get approved?

E: Yes, ma’am

C: But there is a free gift, right?

There was a lot packed into that simple overheard conversation, but the main thing I took away from it was this: Big Lots has credit cards? Honey, if you can’t afford to pay cash in Big Lots, time to rethink your financial strategy. (What the free gift could have been was a close second, but I digress).

Ah, the credit card. Has the mind of man ever come up with a more dangerous, misused piece of plastic (insert Hollywood cosmetic surgery joke here)? Originally designed to be a quick, convenient loan tied to a certain store — the equivalent of running a tab at the bar — they serve a certain purpose, I suppose. Of course, there are medicinal uses for cocaine, heroin and morphine, too. The one thing that all these items have in common is their potential for abuse.

And, just for the record, I know whereof I speak. My ex-wife and I ran up quite the bill keeping a lifestyle that we couldn’t afford, which continued until we couldn’t afford the payments, either. There’s nothing quite like the joy of paying for a meal three years after you ate it.

It wasn’t easy to make the transition from digging a deeper hole to filling the hole back in, either. The first step was to stop digging, and then to find the resources to reverse the trend. The disgust of paying out money every month for things that were already gone — or for some computer products, already obsolete, which is a double kick to the inseam — was enough to get things turned around.

The collector calls were another impetus to wake the frak up. What a lovely, helpful bunch of people. It’s been years, and I’m not behind to anyone, but to this day, if I don’t recognize the number on the caller ID, I have a hard time picking it up.

One of the proudest days of my life was driving the final stake into the heart of the credit card vampire. I still have the statements showing zero balances on the last two, and the biggest, credit cards I paid off. They are tacked up to the corkboard in my home office to remind me. Not that I really need to be reminded. NEVER again.

Funny thing has happened, though. With the economic downturn that rocked the financial system, along with other factors, credit cards companies seem to have been put on the defensive. In May, the Credit Card Accountability, Responsibility and Disclosure Act was passed, which put some reins on what the companies could legally do with interest rates and late payment charges. While it’s nice now that they don’t have unbridled power, the legislation is no match for personal responsibility.

What the credit card companies may have lost in brute force, however, they make up for in sneakiness. For instance, did you know that there are certain purchases you can make on a credit card that potentially red-flag you for rate increases, even if you’re not behind on your payments? Apparently, paying for traffic tickets, marriage counseling and booze makes you look unstable, while buying, ahem, adult playthings looks like you are practicing escapism. Either way, in the credit card company’s eyes, the probability of stiffing them or being late on your payments goes up. So if you buy a round of drinks at the strip club, don’t use your plastic, even if you’re in danger of losing your g-string tuckin’ cash.

An interesting thing seems to be happening, by the way: Punishing their customers doesn’t seem to be working as well as it has in the past. The total amount of borrowing decreased by $10.3 billion in June, and borrowing on credit cards dropped about $5 billion. Are people paying down their debt and taking out fewer cards? Seems to be.

One of the best resources you’ll find when it’s time to have that long, cold talk with yourself and cut up the cards is Dave Ramsey. Host of “The Dave Ramsey Show,” he offers simple, true advice on how to get out of debt and stay out of debt. Sure the advice is simple, kind of like saying “the way to lose weight is to eat less and exercise more,” but y’know what? That’s how you lose weight. It’s not magic, but in a world where common sense seems to be a little less common, it’s necessary to hear every now and again.

And, so, how do you avoid paying outrageous credit card interest rates and late payment fees? Don’t use the stupid things. They can jack the rates up 8,000% and increase the late payment fees to loan-shark levels, but if you don’t use ‘em, it just doesn’t matter.