Posted by Jayce Ooi as Ramblings
Hehe… Forwarded email again… Warning, this is a long one.
Seven Credit Card Company Secrets
Let’s get one thing straight right off the bat: We’re not against credit cards! We have a few ourselves, and we use them all the time. They’re a wonderful convenience and for some things – such as online purchases – they’re now essential.
What we are dead set against is the way many credit card companies try to take money out of your pocket and put it into theirs. Just thinking about the way some companies offer you the “opportunity” to rob your own future makes us livid.
No matter what your situation … whether you carry credit card debt or pay off your balance every month (if you do, way to go!) … the card issuers make it sound like a marriage made in heaven when they solicit your business. But they never tell you how much it will cost you down the line, in dollars
So we’ll tell it like it is: The credit card companies are in business to make money – and they want more of your money.
We want you to be able to see right through the sneaky tricks your credit card company may try to pull. So here are seven secrets revealed – things you’ll never hear from your credit card company – and our solutions to help you keep more of your own money:
Secret #1: Low-interest introductory rates seldom last very long.
Ah, the old “bait-and-switch” routine strikes again. Have you received any credit cards offers in the mail lately? Of course you have … and every one of them probably has a low introductory rate splashed all over it: “4% [or less] for six months!”
The idea is that a lower rate – even for a few months – will be enough to entice you to get on board. And it may be – if you don’t know the full story.
How do you get the full story? In much, much smaller writing somewhere in the offer you’ll find the “disclosure box,” where they bury all the stuff they don’t really want you to know. One of these things is that the super-low introductory rate they lured you in with may go up even before the special introductory period is over.
That’s right. We found the following disclosures in the fine print of one offer: If payment is received late once during the introductory period, the rate will readjust to 12.99%. If, at any time, payment is received late twice in any six-month period, the rate will adjust to 19.99% or higher.
Dolan Smart Money Move: If you sign up for a card with an introductory rate, mark your calendar for the day that the low rates expire. Then, make sure you flag the day one week before to make your payment; pay the entire balance off if you can.
Also, read the current cardholder agreement and ALL inserts that accompany your monthly statement. DON’T BE TOO BUSY TO AVOID BEING RIPPED OFF!
Secret #2: Applying for a lot of different credit cards may injure your credit rating.
Didn’t know that, did you? That’s because the credit card companies want you to carry as many cards as they can get you to sign up for. It’s more money for them.
Here’s the problem: One of the things potential creditors look at is your potential debt. If you have a lot of credit cards, you have high potential debt with a credit line on every card. You may have no intention of using anywhere near the limit on each card, but the creditor knows that you could!
That makes you a higher-risk customer, which means the company will likely try to charge you a higher interest rate. But if you look at the fine print, you may not find out what your exact rate will be until after you apply. The more you apply, the higher the rate you’ll pay. Tricky business!
Dolan Smart Money Move: The solution here is simple: Don’t fill out all of those “pre-approved” unsolicited credit card applications. Be aware of your potential debt… do your homework, check out the deals, and only apply for the cards you need.
Secret #3: Credit card companies want you to pay as little as possible each month.
Over the past five years, some companies have quietly lowered the typical minimum payment from 4% to 2% of your balance. That way you don’t have to pay as much every month. Isn’t that nice of them, trying to make things easier for you?
Yeah, GREAT deal… for the credit card company.
Secret #4: Your credit card may not have any grace period at all.
Most credit cards give you 25 days before charging you interest if you’re not carrying any unpaid balance; some give you 30 days. But here’s what you really need to look out for: Others have cut back to 20 or even 15 days, and a few have NO GRACE PERIOD at all, charging you interest all the time on anything that you buy.
Dolan Smart Money Move: Check the small print and choose the longest grace period that you can find, typically 25 days. Never go with a credit card that doesn’t allow any grace period. You’re just getting ripped off.
Secret #5: Late-payment fees may not be the only ones you’re paying.
Don’t get us started on this one. We understand fees for late payments (even though credit cards have been quietly raising the fees to ridiculous levels), but what really gets us are the other ways credit card companies are finding to rob you.
Here are some of the biggest offenders:
Secret #6: Your credit card company would love for you to take advantage of their generous ‘skip-a-payment’ plan.
You’re familiar with these, right? Usually around the holidays, the credit card company sends you a warm and fuzzy letter “offering” to let you skip making your next payment.
But, shocking as this may be, they’re not letting you skip a payment because they like you. They’re doing it because the want your money! What they bury in that letter is that you still owe interest – every penny of it – on that money even when you skip a payment. Sneaky, huh?
Dolan Smart Money Move: Say thanks, but no thanks to this “generous” offer. And we’ll say it again: Pay your bill ON TIME!!
Here’s why they do it: If you pay just 2% on even a relatively modest $1,900 balance at 18%, it will take 23 years to pay off the balance… seriously! And what’s more, you’ll pay more than $4,000 in interest. That’s more than double the original balance!
Dolan Smart Money Move: Pay more than the minimum every month and save big $$$ in interest. Ideally, you want to pay off the entire balance every month. But if you’re absolutely unable to do that, pay as much as you can possibly afford.
Secret #7: You can haggle for a lower interest rate.
Credit companies spend BIG bucks to find new customers . . . so good clients have considerable leverage. You want to use that leverage to your advantage.
Dolan Smart Money Move: IF you have been a good customer (paying your bills on time), call your issuer and negotiate for a lower interest rate and waiver of annual fee. Be sure to mention any other business that you do with the bank that issues the card. (If you’re behind in your payments or have a history of being late, they may be less inclined to give you what you ask for – another reason to be smart about how you use your credit cards.)
We are constantly telling our listeners that if you’ve been paying bills on a credit card with a 19% to 20% interest rate, then you should let the issuer know, “I want a lower rate or else I’m splitting.” The company knows that you can always transfer the balance to a card with a lower interest rate and tear up the card with the high rates. It costs credit card companies money to replace you as a customer. There are cards with 6%, 7%, 8%, 9% interest rates, and if your credit is good you should be able to get one.
Remember, it’s your money – don’t let those credit card companies take any more of it!
Now that you know the insider secrets, stay credit-savvy and debt-free with these articles.