It’s no surprise that credit card companies are in the business to make money, but you may not be aware of some of the tricks and tactics they use to gain even more of your hard-earned dollars. All of the following strategies are legal, leaving you no alternative but to become educated and protect yourself whenever possible. Here are some things to look out for:
1.) Bait and Switch – You apply for a great credit card offer you just received by mail expecting to not only save with a lower interest rate but to earn travel miles for your next vacation. But when the card finally arrives and you see the terms, you realize that the interest rate is higher and there are no rewards. This happens when you don’t qualify for the offer you originally applied for and the company sends you a different credit card instead. Don’t activate the new offer – call and cancel the account immediately.
2.) Unexpected Address Changes – You lose the envelope that was enclosed with your monthly statement, so you hand post a generic envelope and send the payment on its way. Shortly thereafter you discover that your payment was received late – you now have to pay late fees and possibly a higher interest rate. So what happened? The address you used was changed! Always use the envelope enclosed with your bill to submit your payment. If you have to address your own envelope, verify the address on the front of the statement or by calling the number on the back of your card.
3.) Due Dates & Times – Your payment due date is clearly posted on your statement – but the fine print may indicate an exact time. To avoid late fees and increased interest rates your payment may be actually due by 1 p.m. Remit your payment 10 days early to insure on time delivery.
4.) Over-the-Limit Tricks – When you apply for a credit card it often includes the option to transfer balances from higher interest rate cards to the new account. You expect to receive a credit limit large enough to cover the transfer, but if you receive approval and the allowable credit limit is lower than you anticipated, your transfer may put you over the limit before you even have the card in hand. Never transfer a balance until you have the new account terms.
5.) Costly Cash Advances – Your low APR will be useless if you take a cash advance. With no grace period to pay the money back, you will start interest payments immediately in addition to a fee of between 2 and 4 percent of the advanced amount. Plus, all of your payments will be applied to the lower-interest balance before they are applied to your cash advance.
6.) Not So Fixed – Although it’s called a ‘fixed rate’, its not always what it seems. Credit card companies can still raise your interest rate at any time. The only difference between a ‘fixed’ and ‘variable’ rate is that the issuer must give you 15 days notice before they raise your ‘fixed rate’.
7.) Half Forgiveness – An unintentional late payment can be appealed by calling the company and explaining the situation. You get off the phone and breath a sigh of relief after your late fees are removed. When your monthly statement arrives in the mail, you find that the late payment fee was rescinded but you’re now being charged a much higher interest rate.