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1. Credit Card companies have the right to change your rate at any time. All they need to do is provide 15 days notice. The company hopes you will discard the notice thinking it’s junk mail, never notice and make them rich.
2. Cards with 0% interest rates are not what they seem. Cards with too-good-to-be-true introductory rates usually last for 6 months to a year at most. When the intro period ends, you will often be charged “back interest” from the first day you opened the card.
3. Many 0% cards are only 0% for balance transfers, not for new purchases. Initiating a balance transfer will probably cost you about 3% of the balance.
4. If you are even one day late in paying ANY of your bills, many credit card companies reserve the right to give you a default rate of as much as 39% in some states. This new trick is totally legal and is called The Universal Default Clause. Read more about it here.
5. Perks like cash back, points and airline miles do not work in your favor. By the time you’ve earned anything even slightly worthwhile, you will have already paid thousands of dollars in interest.
6. After your introductory “teaser” rate ends and you’ve racked up a huge balance that you initially thought you could pay off, the rate is now sky high and even more difficult for you to pay off.
7. Credit Card companies frequently use the old “bait and switch” technique: they will attempt to trick consumers into getting their card by offering 0% (or some other low rate) then send the actual card and agreement in the mail at a much higher rate hoping you won’t notice.
8. Your minimum payment is almost all interest. Therefore, your minimum payment is designed so that you will never completely pay the card off. Check your next credit card statement and compare the monthly finance charge to the minimum payment for proof.
9. If you don’t have established credit, you will probably get stuck with a card with a very small limit, a very high interest rate, an initial administration cost and annual fee. Your card will often divide these costs over 12 months so that even if you aren’t using your credit card, you will owe the credit card company something. Another excuse for them to say you are late and slap you with more fees.
10. You have the right to demand changes to your credit card terms. You can try to negotiate a lower APR, a longer grace period or smaller annual fee. If they do not agree, tell them that you would rather not do business with them anymore and would rather take a competitor’s better offer. Chances are they’d rather hang on to you as a customer and will grant your requests.
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Comments
12.29.08
5. Perks like cash back, points and airline miles do not work in your favor. By the time you’ve earned anything even slightly worthwhile, you will have already paid thousands of dollars in interest.
You're assuming that I'm not paying off my card in full every month. My cash back card most certainly works in my favor.
12.29.08
Anna,
You are absolutely correct. If you are paying off your balance every month and redeeming the perks than that is awesome! That is how the card SHOULD be used!
Unfortunately, most people open a card with perks thinking they will do what you are doing and then end up being stuck with balances they can't afford to pay off. From there it is a snowball effect and the balance keeps growing. When this happens the perks are extremeley expensive.
Nicole
12.29.08
Nice post. Thanks Nicole ;)
12.29.08
One thing to keep in mind regarding credit cards: certain places (hotels, rental cars, etc) require putting one "on file" while you are staying there or using the car. If using a debit card, they can (and more certainly will) put a 'hold' on the account for $100 or more, which could cause overdrafts, etc.
In addition, you cannot do a chargeback on a debit card, in the event that you've been ripped off. And fraud protection isn't as strong and could take longer to get back the money if it is stolen.
I use a credit card for all on-line shopping and larger in-store purchase (and pay it off each month), and debit or real 'cash' for everything else. There's nothing that says you can't use the credit card, then immediately send a payment from your bank account in that amount. For a large purchase, why not?
12.29.08
I had a miles card, paid it off every month.
In the end those miles expired without being used...
I cancelled the card and got a cash back one. I pay it off every month, so the cash back is a nice 'rebate' that I put toward the next credit card payment.
12.29.08
I don't know nor care what my interest rate is. I pay the charges in full each month. Let them raise it to 1000% for all I care.
12.29.08
This is great. Thank you making this transparent for us!
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