Teens vulnerable to credit card pitfalls

New rules implemented earlier this year to protect consumers from credit card charges and overdraft fees have added some heft to monthly billing statements.

Some of the highlighted information is enlightening, such as the minimum payment warning that calculates how much more you’ll be paying in interest and how long it will take to pay off the balance.

But there are a host of other important details buried in the statement that could snag young consumers who are just getting the hang of using plastic. Here are three sections of the statement to read carefully:

• Mailed payments: Don’t wait until the last possible moment to pay your bill, expecting the mailman to save the day. Credit card issuers recommend (in bold print) that consumers allow a week to 10 days for delivery. So unless you want to pay more than that 42-cent stamp affixed to the billing envelope, stick your payment in the mail a day or two after it lands.

• Interest rate calculations: If you don’t pay in full, then you’re already over your head and should not be using plastic. Most banks use what’s known as the average daily balance to crunch your finance charges. Basically, your average daily balance is the sum total of your balance on each day of the billing period, divided by the number of days in the billing cycle. To complicate matters, the calculation factors in new purchases and payments. The consumer website Bankrate.com can walk you through examples.

• Account protection: This is an optional service that temporarily suspends any minimum payments you are required to make on your credit card if you suffer a possible life-changing event. But it doesn’t cancel your debt — you are still responsible for resuming payments and paying back the balance owed once the payment protection period ends.

The upfront cost for the protection is usually 50 cents to $1 for every $100 of monthly outstanding balance.

Payment protection plans are generally not a good idea. If you can afford this protection, you should be able to pay the minimum amount on your monthly credit card bill.