5 Secrets the Credit Card Companies Don’t Want You To Know

There are laws that require credit card companies disclose their fee schedules and “fine print” to their card holders. When you first open a credit card account, you’re mailed a small white pamphlet of “fine print”, which describes how they calculate their fees and finance charges (in the “account disclosure statement”) but how many people actually read that thing? And worse, if you do read it, do you even understand what it says?
What you don’t know CAN hurt you when it comes to credit cards! Here are 5 secrets the credit card companies don’t want you to know:
1. Two-cycle Billing. If your credit card uses two cycle billing, it means the interest rate is calculated based on the average daily balance which is computed for the previous month purchases and the current billing cycle purchases (even if you paid the previous month balance in full!) You’re better off choosing a credit card with an adjusted balance method for calculating interest rates.
2. Not all cards have grace periods. A grace period is a 20-30 day span of time during which you can pay off your entire credit card balance without incurring any interest or finance charges. It used to be typical of all credit cards, but more frequently, it’s becoming common for credit cards to have shorter grace periods, or even some without a grace period.
3. 0% balance transfer offers can still cost you money. Even when you sign up for balance transfer offers to transfer high interest balances to a card with 0% interest, you could end up paying more due to a balance transfer fee. Balance transfer fees range between 2% and 5% of the total balance transferred and if there isn’t a maximum fee limit, you could be spending a fortune to move your balance from one card to the next. A 0% balance transfer offer with excessive balance transfer fees can end up costing you more than if you just paid the higher interest rate.
4. Watch out for minimum payment rates that are too low. Sure, it might seem nice to only have to send $10 a month on your credit card balance, but a lower minimum means you’ll be paying on that balance forever. The interest and fees add up faster than what you pay in the minimum payment sometimes, which means you could actually send $10 a month but see your balance growing from one statement to the next! Make sure you look at how much you’re being charged in finance fees and interest each month, and ensure your payments are greater than that amount even if your required minimum payment is less.
5. Increasing fees and interest rates. At least until the new credit card rules go into effect in 2010, a credit card company technically has the right to increase or change fees and interest rate whenever they want, provided they give you 15 days notice. Your fees and interest can increase, or they might decide to lower your credit limit (which can be extremely embarrassing if it happens before you are aware of it and you attempt to use your card to pay for something at the store!)
There are many reasons why credit cards are useful and can make our lives easier – like the ability to pay for things online or over the phone, reserve hotel rooms and reduce the need to carry cash around. If you don’t make yourself aware of the hidden fees or “fine print” associated with your cards, however, the rates you pay for interest or finance fees can quickly escalate.

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This entry was posted on Friday, January 2nd, 2009 at 1:49 am and is filed under Credit Card Advice, Credit Card Use. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.