SmartMoney: 10 Things Your Credit Card Companies Won’t Tell You
SmartMoney yesterday published an article on 10 practices that credit card companies use to get more money out of us, their customers. Even though some of them, such as universal default and two-cycle billing, will be banned when the new credit card rules take effect, which is still more than a year away, we should always be careful when getting and using the plastics. For me, since I am using credit cards almost exclusively to make purchase, the best advice I can give is always pay the balance in full every month. That will prevent you from getting into most of the troubles, if not all. On the other hand, credit card companies always try to find ways to charge us more than they should.
Let’s see what they say behind our back about credit cards:
- Universal Default – “We’re just waiting for you to screw up“: Even if you pay your credit card bills on time every time, you could still see your rates skyrocket if you are late to pay your utility or medical bills. The best way to avoid universal default is paying your bills, all your bills, on time.
- Identity Theft – “When it comes to identity theft, we’re part of the problem“: Do credit card companies have any role in the ever increasing identity fraud cases? You can shred or burn every unsolicited credit card application sent to your house, but “Data about you is not under your control.”
- Your Children and Credit Cards – “Your children are our future“: Credit card issuers really mean it when it comes to marketing credit cards to your children, who can get a credit card when they are as young as 16 years old even though they are still financially dependent on you. To help them develop good financial habit, parents should teach “teens about credit well before they get their first cards and monitoring their spending as they learn to use them.”
- Credit Card Rewards and Freebies – “Our ‘freebie’ rewards are anything but“: Did you ever apply for a credit card just because of its rewards program? I did. Though I am satisfied with the program I am using, credit card rewards aren’t just for everyone. Do your homework and figure out exactly what it takes to get that rewards before signing up.
- Debit Cards – “Debit cards should come with a warning: “Use at your own risk’“: The problem is there isn’t and since debit cards offer fewer protections for consumers than credit cards do, sometimes it’s hard to dispute an erroneous charge. The reason? You draw from your own checking account when paying with a debit card, but borrow the bank’s money with a credit card.
- Two-cycle Billing – “Paid in full? Not necessarily“: If your card issuer uses two-cycle billing instead of daily average balance to calculate interests, you will start to pay interests for your purchase as soon as when the charge is made, before you even you get your bill. Stick with cards using daily average balance.
- Hidden Charges – “We’re accepted anywhere on the globe, but our exchange rates are from Planet Rip-off“: Know how much your credit card company will charge you on currency exchange and ATM withdrawals before using your card oversea.
- Due Date and Time – “We close early on payment-due dates“: That’s why I always pay my credit card bills one-day or two before the actually due date they printed on the statements because there are banks set their payment deadline at 9:00 am on the due date, believe it or not.
- Credit Card Incentives – “Our whims are legally binding“: What seemed to be an irresistible incentive at the time you opened a new account could be gone in as soon as 15 days as long as the issuer gives you a 15-day notice in written. Always pay attention to notice coming from credit card companies, even if they appear insignificant.
- Exceeding Credit Limit – “Go ahead and exceed your credit limit — we like that“: If you charge more than the available credit line on your card, the transaction may not be rejected. And if it does go through, there’s one thing likely to happen: the increase of your interest rate. And on top of that, banks will change you as much as $30 over the limit fee. Be wary.
Did you fall victim to any of these?
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