5 Dirty Tricks Credit Card Companies Like to Play

While your credit card company might like to pretend they have your best interests at heart, it turns out that’s not always the case. Credit card companies, like most other businesses, have ‘loopholes’ in place to drain every cent they can from you.

Being aware of these tactics is the best defense. Otherwise, you’ll be paying astronomical interest rates and navigating through a minefield of penalties that are only mentioned in the very fine print of your credit card agreement.

Explore the following ways to monitor your interest rate and avoid those penalties:

1. The grace periods are shrinking or don’t exist at all. Back in the good old days, you had 30 days to pay your balance without suffering the financial burden of paying any interest. Most cards now have a grace period of either 20 or 25 days.

* Some credit cards have no grace period. This means that the interest starts accruing the moment you make your purchase and continues increasing until you pay off the balance.

* If you want to use your card and not pay any interest, find out when your company starts charging interest. The longer the grace period, the better.

2. Fixed interest rates aren’t really fixed. It would seem that a fixed interest rate card would actually be ‘fixed,’ but it’s not. Credit card companies can actually change rates whenever they please.

* To change your rate, all that’s required is a 15-day notice to you as the cardholder.

* Your credit card company is hoping you don’t pay attention to those pesky notices they send in the mail from time to time. That’s how they try to deceive you.

* Be certain you’re actually reading the mail from your credit card companies.

3. One late payment can result in 2 penalties. You might be all too familiar with the Late Payment Fee, which can be as high as $35. There’s also another possible fee that can be incurred: The Penalty Rate. This penalty can be charged if a payment is made 60+ days late.

* The penalty rate is actually a new interest rate that’s imposed on your account. The rate can be as high as 29.99%, and that’s exactly what most credit card companies charge.

* The law requires that the penalty rate be removed after six consecutive on time payments. The Card Act of 2009 has all the details.

4. That same penalty rate can be placed on all your credit cards. That 60-day late payment can result in all your credit cards having the penalty rate. This is true even if you’ve never made a late payment to those other cards.

* One mistake can cost you a lot of money. Having all your cards bumped up to 29.99% interest rate is significant if you carry balances on your credit cards.

* Make your payments on time. It saves you money and preserves your credit score.

5. Balance transfers can be expensive. Maybe you’ve seen those balance transfer checks credit card companies periodically send out. Depending on your situation, they can be great. But be careful!

* These checks seem like a convenient way to consolidate everything into one account. But many of those checks have a 3 to 5 percent fee attached to them.

* These fees can often cancel out any savings you would have gotten by transferring your balance to a card with a lower interest rate. Do the math before you write one of those ‘checks.’

Be aware of these dirty tricks so that you can avoid them. Avoid making late payments and always read the fine print. Remember the credit card companies are trying to separate you from your money. Don’t make it easy for them! If you always pay your balance in full and read the fine print, you’ll be in great shape with your credit.

8 Good Reasons to Use a Credit Card

Personal finance gurus spend a lot of energy attempting to prevent us from using credit cards, usually with good reason.

Credit cards are frequently abused and are the cause of a lot of personal debt. However, credit cards bring you a lot of advantages as long as you use them wisely. In fact, credit cards are frequently a better way to pay for things.

Consider these Credit Card benefits?

1. Signup bonuses. Many credit cards offer significant rewards when used responsibly. For example, consumers with good credit can be approved for credit cards that offer signup bonuses. These bonuses can be worth $50 to $250 or even more. Some credit cards provide points that can be used to redeem rewards like gift cards or airline tickets.

2. Cash back. With the right credit card, you can earn from 1-5% back on all your purchases. Depending on how much you use it, that can be like getting a raise at work.

3. Investment rewards. Some credit cards, such as the Fidelity Investment Rewards card, give a higher rate of cash back. However, that cash back must be deposited directly into an investment account. This is also nice because it encourages you to invest and save.

4. Frequent-Flyer miles. Nearly every airline has at least one credit card offering. The ultimate value of these cards is really determined by the specifics of the card and the airline tickets you actually receive and use. The details can vary so shop around.

5. Safety. Using a credit card makes it a lot easier to avoid financial losses due to fraud or unfortunate timing on automatic payments.

* For example, if you pay your bills with automatic payments directly out of your checking account, these automatic drafts can also potentially result in insufficient funding fees and late payments, which will have a negative effect on your credit score.

* If your debit card is used fraudulently, your money is taken out of your account instantly. It can also take some time to get your money back. By comparison, when your credit card is used fraudulently, you don’t lose any money; you simply notify your credit card company and you don’t have to pay for those transactions.

6. Grace period. Credit card usage gives you time to pay, usually a couple of weeks on the average before any interest kicks in. With a debit card, the money is gone instantly. If you have your money in a high-interest checking account, the amount of interest you will earn can be significantly more over time by paying for your purchases with a credit card.

* When you put your purchases on your credit card, your money will spend more time in your checking account, where it’s earning money for you. If you use a debit card for your purchases, the money is in your account for a much shorter length of time, thus earning less interest.

7. Insurance. Most credit cards include a plethora of consumer protections that most people aren’t aware of. This includes things like rental car insurance and travel insurance. Some product warranties are also made more advantageous when you pay for the item with your credit card.

8. Building credit. If you don’t have a credit history or if you need to improve your score, a credit card can help raise your credit score. Obviously, this assumes that you use your card wisely. Debit cards do nothing to help your credit score.

See, credit cards aren’t all bad! Provided you can use them responsibly, credit cards potentially have a lot to offer. So dust off that credit card and put it to good use; just be sure to pay it off in full every month.

All About Credit Card Delinquency

Even though credit card delinquency has become increasingly common during the past several years, most consumers’ understanding of it continues to be lacking.

Too many of us don’t know how to avoid or solve this personal financial challenge!

The good news is that once you gain a more complete knowledge of delinquency, dealing with it is relatively straightforward.

When Do You Become Delinquent?

What exactly is credit card delinquency? A credit card customer is delinquent when he fails to make at the least the minimum credit card payment. Delinquency is separated into degrees that indicate how many payments have been missed. These ranges are often referenced in terms of days.

For example, on the day after the first payment is missed, the holder is one day delinquent. After you miss a second payment, the account is deemed to be 30 days delinquent and so on.

Theoretically, a credit card holder is delinquent after just one missed monthly payment. On the other hand, delinquency is commonly not reported to the credit bureaus until after two payments in a row have been missed.

What Are The Effects Of Delinquency?

Being reported delinquent to the credit bureaus most certainly has a negative impact on credit scores.

Scores could drop as much as 125 points with three consecutive missed payments. Once four payments have been missed, the impact on the credit score is more severe and the account is likely to be sent to collections. Legal action against the cardholder is a real possibility at this point.

How Do You Get Out Of Delinquency?

There is a way to stop and get out of delinquency. Making a single minimum payment ends the progression of the delinquency and keeps the account at the current level of delinquency.

This is crucial, simply because being reported to the credit bureaus 120 days late is much worse than being 90 days late. Making even one minimum payment can be an effective strategy to keep things from progressing too far.

Once you start trying to make up your past due payments, be careful to avoid these damaging errors:

1. Making less than the minimum payment. Unfortunately, making a payment that is less than the minimum doesn’t have any effect on the delinquency. So, when you make a small payment, it really doesn’t help the situation. This error can easily be avoided; just be sure to only make payments that are greater than or equal to the minimum payment.

2. Making only one minimum payment. Frequently, consumers mistake the minimum required payment with the total amount due.

* The total amount due is the amount that needs to be paid in order to bring the account current. This amount usually consists of several minimum payments, so it’s important to continue making extra payments until the account has been brought current.

Credit Repair After Delinquency

As soon as the account is current, you can start negating the consequences of the delinquency. The more the negative information is covered up with positive information, the less impact the delinquency will have.

Secured credit cards are especially apt for credit betterment. These cards require a deposit to open, and the cards are always approved for this reason. Since the risk is minimal for the credit card company, the fees can be less. Whenever you decide to cancel the card, the deposit is returned.

While credit card delinquency cannot be recovered from overnight, it is possible to suffer no lasting effects in the long-term. Once the delinquency has been rectified, the negative history can be diluted as much as possible.

The key is to be patient and acquire a secured credit card. Using that new card wisely will allow you to be trusted by lenders again. Credit card delinquency is a challenge, but it is a challenge that can be dealt with successfully.