Why are credit card companies doing this? Because 75% of their revenues come from finance charges, and conscientious users who pay their balances in full each month are in effect using the cards for free. This can be extremely unprofitable for credit card companies.

Some credit card companies are imposing penalties that affect all customers, including:

• Eliminating the 30-day interest-free grace period following a purchase.
• Charging an over-limit fee if you exceed your credit limit by as little as $1, even if your purchase has been approved over the phone by the store.
• Imposing a late fee of up to $20 if you miss your monthly payment date by one to three days.
• Increasing your finance charge if you don't pay on time twice in one year. Some punitive finance rates range from 24.9% to as high as 32.6%.

How You Can Avoid Credit Penalties

• Use fewer credit cards. This way you won't need to keep track of multiple bills or multiple credit terms.
• Carefully read the fine print. Make sure you understand the terms and conditions of your credit card. Read any new or undated information that is sent to you.
• Pay off your balance each month. If you are unable to pay the balance in full, try to pay more than the minimum balance. The sooner you pay off your balance, the more money you save in finance charges.
• Prudently shop for cards. Credit card issuers will send you credit agreements before you apply for credit. Use them to study and compare terms and conditions before you apply for credit.