Do you have a favorite credit card that you use for rewards or points? How about a retailer credit card such as a American Express or a Victoria Secrets credit card? It is easy to fall prey to their marketing tactics and sales pitches. After all, since you shop there, might as well earn some points, right? No matter which card you have, you will discover six credit card secrets they don't want you to know.
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In this article, you will learn 6 things they do not tell you and hope you overlook in your credit card statement's disclosure and policy. These secrets and legal loopholes will help you payoff debt faster to save you more money.
1. Must Be Given 45-Day Notice Before Your Rate Increases
Have you checked your mail lately and found credit card offers for 0% for six months or 12 months? It is typical to receive such offers in the fall in hopes that consumers make credit transactions during the holiday season.
What you may not know is as a result of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, credit card companies are now legally bound to provide consumers a minimum of 45 days notice before raising their interest rates.
Also, that 6-month interest-free introductory rate, that is the minimum requirement that derived from the CARD Act. Companies offering low introductory rates can not raise the rate for a minimum of six months.
Have you taken advantage of a rewards card offering 0% interest for six months? Rest assured that this rate will not increase as long as you make the on-time minimum payments.
2. You Must Be Given Time to Pay Your Bill
When I was 18, I received my first credit card. How exciting this moment was at the time! With financial flexibility and working two part-time jobs, I could finally buy that $200 DVD player at Wal-Mart.
Fast forward to the following month, I received my credit card statement only to find the payment was due in 10 days. With my paycheck being 12 days out, I was sure to get slapped with a late fee and other penalties.
During this time, credit card companies had a lot of power and influence. Fortunately in today's market, all credit card companies must be given at least 21 days to pay their bill. The 21-day period starts on the day the credit card company mails your statement.
What if your statement is delayed a few weeks? Have no fear! If you make a payment on the 21st day but this date falls on a Saturday, Sunday, or a legal banking holiday, credit card companies must post the payment the next business day. They are legally required to push the due date to the next business day when payments are made on one of the above days mentioned.
However, be sure to keep proof that you made this payment (post-mark date, picture, etc). The best way to avoid any delays with credit card payments is to set up a payment online through your credit card's website. Another method is to call the credit card company directly and make a payment over the phone.
3. Card Companies May Waive Fees and Lower Interest Rates
Nobody is perfect and everyone is busy all the time. We tend to forget and things slip our minds. If that happens to you and you accidentally forgot to make a payment on time, you may see a late penalty posted to your account.
Did you know the credit card companies may work with you on this problem and either lower your interest rate and/or may waive the fee altogether? Try it. But, before you just pick up the phone and randomly have a conversation with the company's rep, it pays to be kind. Try this Script before you call.
4. Double Penalties for Late Payments but Fees are Capped
Most consumers are aware of late penalty fees being posted to their account should you miss an on-time payment. What you may not know, is card companies are likely to charge you twice.
Not only are you paying interest on this debt, but the credit card companies may also increase your interest rate known as Penalty APR. Sadly, it doesn't stop there. While you are likely to see a late penalty posted to your account, you may also discover your statement has one of these charges: Over-the-Limit Fee, or Returned Payment Fee.
Late Payment Fees are capped at two different levels. If you have no record of late payments within the last six months, your late payment fee is $28. If you have missed a payment in the previous six months, your late payment fee is capped at $39.
5. Request a Lower Interest Rate
Everyone knows that debt can pile up quickly. It isn't a secret. We know interest rates are our enemy when achieving financial freedom. We know that the higher the interest, the more difficult it is to pay off the debt.
Did you know you can request a lower interest rate? While not everyone can be successful at this, it is worth your time to make that phone call. However, before you call, you have some homework to do.
First, review all your credit statements in the last 6-12 months. You want to kindly remind the credit card representative on the phone your loyalty to keep on-time payments and maintaining low balances.
Secondly, if your credit score has seen improvements, this will help too. Check your score at ... to determine how much this has increased. The better score you have, the more leverage you can have to lower your interest rate. Remember, kindness can go a long way!
Thirdly, research other credit cards that offer lower interest rates. This can be used as leverage because your current credit card company wants to continue making money off of your debt and will not want to see you transfer your balance to another firm.
6. Never Pay Minimum Payment
I don't want to sound hypocritical here. When you are paying off debt using the Snowball or Ladder Strategy Method, you are following a plan that requires minimum payments. In this particular line item, I am referring to avoiding the minimum payment when you have excess cash.
Perhaps you know a big date is coming up and you need to buy a present. Or maybe you want to use that extra money for a vacation. Because of this decision, you decide to make the minimum payment on your credit card.
Credit card companies are trusting you only make the minimum payment. The longer you are in debt, the more money they make. The minimum payment is typically one-to-three percent of your balance.
According to an article by CNBC, it you have $6,081 in credit card, making the minimum payment would take roughly 14 years to pay off. If you double the minimum payment, it still takes over 5 years.
Kiss that Debt Goodbye
While I am typically against credit card debt, I'm realistic and know many consumers have 2-3 credit cards, if not more. The key to using credit cards is being responsible but realistic with your purchases. Credit cards are not designed to borrow cheap money or help you achieve financial freedom. When picking a card or working your household to pay off debt, have a plan in place to pay off those debts!