Sneaky business! The credit card industry is like any other business in that it has to advertise, provide products, follow regulations and keep secrets. Conspiracy theorists dig out your tinfoil hats and the rest of you, listen up: we’re delving into the hidden and disguised practices that credit card companies would really prefer you didn’t know.
The Balance Will Never End
It will take decades to pay off that chunk of money on your card if you only pay the monthly minimum. The credit card statement will tell you that (in fact, it outlines in gory detail how long it will take), but many people don’t follow through on the line of thought. What the huge term means is that you actually have no term at all and thus, no amortization.
Let’s look at it another way. If you have a car loan of X amount, you will pay it off in Y amount of time (at minimum). It’s right in your loan agreement. For example, we have a car loan right now that will be paid off completely by April 30th 2015. Once it’s paid off, it’s done and done. But credit cards don’t have that set period! It can take you anywhere between a month and eighty years to pay off your balance; it all depends on how much you pay and how much you use the card.
Bottom Line: Pay far more than the minimum and reduce your debt as quickly as possible.
The Intro Rate
How many ads have you seen showcasing credit cards with an Intro rate of 0% APR? It’s so common that it’s practically mandatory for companies looking for new customers. The new customers on the other hand have to be smarter than that and understand a few things. One, pay attention to when the introductory period ends and aim to have nothing on that card well in advance of that. (What many people don’t realize is that the billing cycle ends/begins around the middle of the month, not the end. This can cost you a lot of money in interest if the end period sneaks up on you.) Two, pay close attention to what you’re getting 0% APR on: purchases? Balance transfers? Both? You won’t get it on cash advances, so avoid those altogether. And finally, read the fine print all the way to find out under what circumstances that intro rate can be revoked early.
They can Change Your Rates
Technically, you have to get at least fifteen days notice of a rate change. Reality? You can have your rates change on you and affect purchase you made before the change and you’ll pay far more than you thought. Sneaky, sneaky! Another thing to keep in mind is that some credit card issuers will actually raise your fees if you’re late on a payment for any bill: mortgage, utilities, and other credit cards. This is because the lender has the right to protect its interests and if you’ve started proving yourself untrustworthy, up your rates may go.
Mind Your Credit Limit
If your credit card company is going around slashing credit limits, they will do something a bit nasty and try to slash them a couple of dollars above your outstanding balance in the hopes of snagging some over limit fees and extra payments out of you. This can damage your credit score and your budget. Make sure you always leave some wiggle room in your credit card, just in case.
Consumer Protection Protects the Company
Every so often, you’ll get calls and ads trying to get you to buy into a consumer protection plan. The idea is that if you lose your job, you won’t have to worry about your debt.
Well, not so much. If you think about it, any company worth its salt is not going to forget your debt while you get a new job. Instead, you pay a much smaller amount every month, but you still have to worry about the interest piling up on the debt. Just say no to these plans and keep money in your savings accounts in case the worst happens.
What’s interesting is that every single dirty secret about credit card companies is actually spelled out for you right in the fine print–you just have to make sure you read it! Before signing up for any credit card, read all of the terms and conditions, make sure you understand them and then exhibit some care when using the card.
So Which Credit Card Company is Best?
CardSight has many great issuers that offer beneficial cards and terms. We offer a helpful tool to search and compare credit card offers. Although if you’re just looking for the bottom line as to which is the best credit card overall, we recommend the Discover it Card or the Discover it Student Card.