Ah, credit card companies, the super nice, super generous non-profit organizations that give us credit to improve our lives and help us live out the American Dream. Just kidding, they are totally evil. They are also secretive. Let’s talk about the secrets that your credit card company isn’t letting you in on.
1. It can change the terms on you…and it will. Credit card companies draw you in with low interest rates, great rewards, and low or no fees. However, your card issuer can change those terms LEGALLY with little notice.
Combat it: Pay attention to any and all mail you receive from your credit card company. You wouldn’t want to miss getting your interest rates doubled or your cash back rewards turning into online game tokens. Call and negotiate terms you aren’t happy with. You can always nicely threaten to leave if they don’t accommodate you.
2. It doesn’t want you to make timely payments. Think your credit card company cares if you make timely payments? Think again! Believe it or not Citi Bank is not sitting around waiting for your $35 minimum payment. If you pay late, the bank gets a late fee from you. They like money more than care about your credit.
Even better than a late fee, a late payment gives the credit card company an excuse to raise your interest rate. No problem if you pay off your balance every month, but most people who make late payments don’t.
Combat it: Pay at least the minimum payment on your card by the due date. To make things even easier, set up an automatic payment. Just whatever you do, don’t pay late!
3. It markets to your kids. College students can get credit cards without income or previous credit. In fact, credit card companies entice college students with free food and swag. Why? Because college students are notoriously irresponsible (obviously, they are still teenagers), and the companies know they will easily make up the cost of pizza on interest payments and late fees.
Combat it: Educate your kids about the financial dangers of credit cards. They are technically adults so they don’t have to listen to you but you at least have to explain how interest works so you know you tried.
4. Rewards are used to get you to overspend. Many credit card companies offer a bonus incentive like “spend $6,000 in the first six months for an extra 20,000 points”. While this can benefit you, it can also cause you to spend more than you normally would and/or more than you can afford. The intent is for you to spend enough that you are forced to carry a balance from one month to the next and that you will incur interest. If you are paying interest, it may be eating up the rewards you are realizing.
Combat it: If you decide to play the credit card game, make sure you understand the terms completely and have a game plan for accruing rewards instead of just spending on impulse.
5. It is profiting when you spend abroad. Credit cards are pretty much accepted anywhere, but foreign transaction fees are between 1% and 3% of purchases. This includes fees from buying from vendors abroad.
Combat it: If you travel internationally, make sure you choose a credit card with zero foreign transaction fees.
6. You actually have power over your credit limit. Credit limits are generally affected by income and credit score. If your credit score is good, you can request a higher limit. However, it is considered a hard inquiry so your score could take a small hit.
Do it: If your credit score can drop a few points and still be fine and you want to lower your credit utilization, go ahead and ask for a credit line increase. Just don’t use it as an excuse to run up more debt.
7. You aren’t the only one who benefits from 0% interest rates. Credit card companies will draw you in with good terms. One of the best tactics is offering 0% interest for 6-18 months. However, if you make a late payment during that time frame, the company can reset your promotional rate to the default interest rate and even apply retroactive interest charges.
Combat it: Don’t miss a payment. Ever. And also have a plan to pay down the debt before the 0% interest rate expires.
8. Its fees are negotiable. Have you ever heard people say “it never hurts to ask”? Well not only does it never hurt, it can also REALLY help. Annual fees, late fees for first time offenders, and foreign transaction fees can all go away with a short phone call.
Do it: Grow a pair and make a call when you want to avoid fees. Note — you always want to avoid fees. Be courteous yet firm, you might be surprised how far you can get with just a simple phone call.
9. Your due date is negotiable. While your credit card company will set a due date for you, it can be changed at your request to work around your paydays.
Do it: Call your credit card company up and request a due date change. You will almost certainly get approved.
10. Your APR is not set in stone. Did you know that you can actually get your APR lowered upon request? As interest rates fluctuate, better APRs become available to good customers. Of course, no one is going to tell you that.
Do it: Call your credit card company and request a lower APR. Make sure to remind them that you have been a great customer for X amount of years and that you are considering other credit card companies with better terms.
Your credit card company has secrets. Know your rights and theirs to keep your terms favorable and avoid derailment by way of fees.
Which of these secrets are news to you? Anyone going to try to negotiate better terms?