If you think about it, you’ve got a close, intimate relationship with your credit card. Both of you have been inseparable through each daily transaction. You treat it right by paying your monthly minimum payment on time. You know all your card’s intimate details, such as its credit limit & interest rate, right down to memorizing every reward point. Most likely, you even know your card number by heart. Unfortunately, there’s some bad news — terrible enough that once you hear it, you may be forced to break it off with your Creditors once and for all:
Your credit card companies have been holding out on you.
The fact is, you’ve been kept in the dark about several secrets because your financial benefit comes at your card issuer’s financial loss. Here are some of the things your creditors do not want you to know – secrets that offer real credit card help.
- Fixed rates aren’t really fixed. Issuers can raise your APR whenever they choose. This information isn’t necessarily a blatant secret, but it’ll be hidden to sign on with a fixed introductory interest rate that may change at the company’s will. You have the right to be notified 15 days before a potential rate increase.
Tip: To stay on top of potential rate increases, check your mail; you’ll receive notifications in a thin, discreet white envelope.
- One late payment … two penalties. In a perfect world 1 late payment = 1 penalty fee; on-time payments equal zero fees. In this imperfect world, you can be penalized with two surcharges on one delinquency, and you won’t know about them until you’ve been charged. These can come in the form of a late fee (up to $35), and a penalty rate – a permanent interest increase that can jack up your APR to as high as 29.99 percent! The 2009 CARD Act sought to place limits on these increases, though the details aren’t widely known by the average cardholder.
Tip: Know your payment due date. If it’s getting close, try paying by phone or online.
- Twice the interest in one month. Another financial punch comes in the form of a legal maneuver which allows your card company to impose two months’ interest for just one month of late balance payments. For example: you’re charged twice the interest for a partial balance payment in October even though you paid on time in September. Called double-cycle billing, the card issuer looks at your average daily balance over two consecutive months and charges you higher interest based on the month you carried a higher balance. It’s not even the interest that makes this a problem, but the principle of being punished for good financial behavior.
Tip: Not every credit card company uses this practice. If yours does, you might want to switch to another one.
- Disgraceful grace periods. How many of us who’ve made big-ticket purchases have been thankful for the grace period? Say you charge $1,000 to your card and pay $250 by the due date to hold off your creditors. Most cards carry grace periods up to about 25 days, allowing you to pay off the remainder, interest-free. But in the spirit of profiteering, many providers are reducing the grace period to just 20 days, while some are doing away with them altogether. That means you’ll get charged interest on every purchase, even with timely repayments.
Tip: Before snatching up a no-limit card, ask your provider if the limit is predetermined, and be careful not to spend beyond that amount.
- No card limits – just with limits. Many consumers in possession of a no-limit credit card discover they have a revolving spending cap – let’s use $5,000 – but only learn of it after racking up $7,000 in purchases, leaving them stuck with a remaining $2,000, plus interest, to pay off. Why is this so? Your card company advertised your plastic as no limits, but it’s really set at a no preset limit, based on your own month-to-month spending and behavior patterns.
Tip: Avoid this fall from credit grace, and check how many grace period days your credit card company offers.
- Minimum payments to the maximum. It’s the nature of the credit beast: The longer you stay in debt, the more interest credit card companies can charge, and the more money they make. In the past, card holders had a five percent minimum monthly payment. This became problematic for creditors because people were motivated to pay off their balances more quickly. So they lowered the monthly minimum to two percent. But now, with smaller repayment requirements, we’re prone to spend more and accrue more debt each month. Experts maintain that this move by card companies adds thousands of dollars in interest, creating a repayment schedule that could last years, if not decades.
Tip: Whenever possible, pay more than the monthly minimum due.