Credit Card Secrets: Reading the Fine Print
It’s all hidden in the fine print.
Low introductory rates can be quite enticing. A credit card company may send you an incredible offer of rates as low as 0%. After closer examination of the 
details contained in the fine print of the agreement, you realize that after your 6 month introductory period expires, the interest rate could revert to a typically high rate of 18%. While it may be beneficial to transfer balances to this card during your “honeymoon” period, don’t forget to either eliminate the card after this period or modify your spending to adjust to the higher rate.
You paid on time, but we’re still raising your interest rate.
I bet they never mentioned “universal default.” Sound scary? Well the ramifications are. Let’s say you make consistent payments on your credit cards and never miss a beat, but you fell behind on your car payment. Now you’re considered at high risk for default and you will be charged a hefty price indeed in the form of higher interest rates. Universal default is a practice increasingly used by more companies to raise your credit card interest rate when you’ve been late in making a payment on an unrelated account. Perhaps this increase is triggered by something that is not entirely your fault. A situation arises that you are awaiting the resolution of a billing dispute which causes a late payment notation on your credit report. Immediately you’re zapped with higher interest rates on several of your credit cards. The best way to avoid this is to pay all your bills on time. Even if you are in dispute, pay now, or pay through the nose later.
Your identity was stolen? Whoops…sorry.
Everyone has heard the stories of identity theft victims. Oftentimes this type of thievery begins with a forged credit application where a $5,000 line of credit is opened in your name without your knowledge. Those all too prevalent credit card offers can often be the culprit. There are however, ways to safeguard yourself from potential identity theft. Obtaining and reviewing your credit report regularly is vital. By doing so you have the opportunity to catch discrepancies and monitor changes in your file. Credit reports can now be obtained for free once per year for each credit bureau from www.annualcreditreport.com. Using a paper shredder can be very effective in destroying all those credit card offers that might invite theft.
We might say “free” rewards but you should already know there’s no such thing.
Credit card companies will do anything to draw you in. In the competitive credit card marketplace, these companies promise their “high-rolling” customers such things as frequent flier miles, but oftentimes these promises come with hidden costs. Consumers who thought they were getting something for free might be surprised by high interest rates or annual fees. The best thing you can do is to become educated about “rewards” cards and their true costs. Choose the one that really makes sense for your lifestyle. If you don’t do a lot of retail shopping, than a card geared towards rewarding customers that shop at specific merchandisers may not benefit you. This instead may encourage you to spend when you ordinarily wouldn’t.
Using debit cards can be risky business.
While debit cards physically resemble credit cards, they are not the same; debit cards do not offer as much consumer protection. Debit cards are more convenient than using paper checks as transactions can take as long as a swipe of the card. However, they draw money from an actual checking account. If a transaction turns out to be problematic, you may not have the same ability to dispute it as you would using a credit card. Additionally, unlike with a credit card, you may also be on the hook for purchases made with a stolen debit card.
Cash today. Pay tomorrow.
Cash advances can be lifesavers in a pinch. The downside is they can leave you in more than a pinch when you receive your next statement. Credit card cash advances can put cash in your hand when you need it most and banks will even encourage you to withdraw cash by giving you checks to be drawn against your credit card account. Only use this option in emergency circumstances. The interest rate on cash advances is often many percentage points higher than your regular interest rate. It’s not uncommon to see interest rates on cash advances skyrocket to 25%. Withdrawing cash from your card using an ATM machine will only exacerbate the situation as you will incur an additional fee for the advance. To add salt to your wound, there is no grace period for cash advances. Interest on your transaction accrues immediately.
Going the extreme is cool—take the bait and exceed your credit limit.
If you thought making a purchase that takes you over your credit limit would be declined, think again. While you may initially be excited that you were able to land that new TV, outfit or something else you thought you “needed” immediately, once you see your resulting interest rate, you’d wish you had rethought your purchases. Exceeding your credit limit could bump your interest rate as high as 32% percent in some extreme instances. And if that wasn’t bad enough, banks sometimes tack on a $30 fee for balances that remain above the credit limit each month.
Everything is negotiable.
One of the biggest bank secrets is the fact that you can negotiate with them for better terms. Things like interest rates, annual fees, billing cycles, and the waiving of some late and overage fees are all negotiable. “It never hurts to ask,” and in this case it can make you feel much better about your credit card account.
Credit card companies are indeed only concerned with their bottom line, and you need to be concerned about yours as well. Bottom line—wise up. Educate yourself on the tricks these companies employ, read the small print, pay attention to unusual fees and make sure you ask questions about terms you don’t fully understand. The only one ultimately able to protect your interests is you.
2-6-2012
by Dan Seitz
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2-3-2012
by Chris Martin
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12-5-2011
by Neil Hayashi
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Your credit rating has a direct impact on the interest rate you'll pay on your credit cards. See below for today's APR averages:
| Credit Rating | APR Avg |
| Excellent Credit | 12.51% |
| Good Credit | 16.57% |
| Fair Credit | 20.87% |
| Bad/No Credit | 34.26% |
Dan Seitz
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Dan Seitz
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Dan Seitz
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