Somewhere, buried deep inside the impenetrable legal-eze of your credit card agreement — you know, that document that you shoved in a file, through a shredder, or is gathering dust in your “to do” folder (along with some coupons that expired several years ago) — are some murky, opaque rules that your credit card company isn’t going out of their way to help you understand. On the contrary, the less you know, the happier they are; because it’s good for their bottom line, and helps pay for those warm and fuzzy TV commercials that suggest credit card companies are your BFF. That Morgan Freeman can sell anything!
To right this wrong and empower you with the knowledge you need — and frankly, deserve — here are 4 secrets that credit card companies don’t want you to know:
- You may know that credit card companies need to give you 45 days notice before changing (i.e. increasing) the interest rate. But what you probably don’t know, is that the new interest rate comes into effect a mere 14 days after the notice was mailed. Keep this in mind to avoid an unpleasant surprise on your statement!
- If you’re late on a single payment for one credit card, then all — yes, all — of your credit card issuers might ratchet up your interest rate. Per the CARD Act, if they opt to do this, then they must review the increase after six months. However, there is no guarantee that they will lower the rate to the previous level. The moral to this story? Don’t miss a payment!
- The “Minimum Balance” on your credit card statement does not represent the amount that you should pay. It’s basically the least amount you can pay without damaging your credit score. Credit card companies love folks who only pay the minimum amount. They’re called “revolvers”, and are the gift that keeps on giving. If this sounds like you, then stop giving gifts to your credit card company (or companies). They make enough money, already!
- Your so-called “no limit” credit card may indeed have limits. Why? Because, your credit card company has likely established a pre-set spending limit based on your purchase history. Keep this in mind if you’re planning on using your credit card to buy a big ticket item, like a vacation or home repairs. You might have to find another source to finance a chunk of the bill — which could add to your total costs.
The Bottom Lines
Credit cards are financial tools that can either work for you, or work against you. Keeping the above in mind and making sure that you grasp the rules as clearly and vividly as a giant LED billboard — like the kind that a sign company puts up on the side of the freeway, and that you can see from a mile away — will help ensure that you stay in control of your credit cards vs. get controlled by them.