Many people think that they know everything about their credit card. They memorize the number, note the interest rate, know their credit limit intimately and even memorize every reward that they are eligible to get.
Unfortunately, there are several secrets that your credit card company doesn’t want you to know because the more you benefit, the more your credit card company loses. (Note to self: they don’t really like that.)
With that in mind, below you’ll find a number of things you card carrier doesn’t want you to know but, because we love you, we do. Enjoy.
Secret #1: Those “fixed rates”? They aren’t really fixed. The fact is, your credit card issuer can raise your APR whenever they feel like it and, while this isn’t necessarily a huge secret, it’s usually so deeply hidden in the fine print of the agreement you sign as a cardholder that you’ll probably miss it. Most card companies entice their customers with an “introductory” interest rate and, by law, they need to notify you about 15 days before it increases. But make no mistake, increase it they can and, usually, will.
Secret #2: If you make 1 late payment you’ll get 2 penalties. Everyone knows that if they make a late payment they’re going to get a penalty fee tacked on to their next bill, but most don’t realize that they actually get two penalties, a late fee up to $35 and a penalty rate, meaning an increase in your APR as high as 29.99%. So not only will you be paying a penalty for late payment, but afterwards another penalty on each monthly bill in the form of an increased interest rate.
Secret #3: That “no card limit” card actually comes with limits. Many credit cards that are advertised as having “no spending limit” actually have a “revolving spending cap”. Your credit card company advertise it to you as having no limits but it actually has no preset limits, which are determined by your spending habits and behavior. If you spend more than this preset limit the penalties and interest will set you back an ugly penny.
Secret #4: The “grace period” on most cards is being reduced or removed. If you have sometimes been thankful for having a grace period to pay off your credit card before interest starts being charged, it’s time to check with your credit card issuer to make sure that you still have one and how many days it actually gives you. Many credit card companies are reducing their grace period from 25 to just 20 days and some are getting rid of them completely. That means, in some cases, that you’ll be charged interest on every purchase even if you pay your bill on time.
Secret #5: Some credit card companies will charge you interest twice in one month. Credit card companies use a little legal maneuver that allows them to charge you two months interest for just one month of late payments on your balance. It’s called “double cycle billing” and it allows them to charge you a higher interest based on any month when you carry a higher balance if you paid a partial balance payment in the previous month. At times like this one might decide against credit cards and go for a payday loans instead
Secret #6: The lower minimum payment requirements work against you. Here’s a fact; the longer amount of time you stay in debt, the more money credit card companies will make from you in interest charges. It used to be that there was a 5% minimum monthly payment on most credit cards but today, because credit card companies realized that people were paying off their balances too quickly, they lowered it to just 2%. This move looks like it gives you some “breathing room” on paying off your credit card balance but it actually adds hundreds of thousands of dollars to the coffers of credit card companies every year.
Secret #7: Your APR can increase even if you make a late payment to another creditor. Let’s say that you make a credit card payment on time but you’re late on your car payment. Did you know that your APR can be increased across each line of credit in your name because of that? Probably not, so imagine your auto or home loan going from 3% up to 29%. It’s called the “universal default clause” and it helps credit card companies against people who “pose a credit risk”, meaning that any creditor can increase your APR even if you didn’t pay them late but paid another creditor late.
Now that you know these dirty little credit card secrets, you can see why paying your credit down as quickly as possible, reading the fine print in your cardholder agreement and always paying your bills on time is vitally important.