Here is a list of nasty practices some credit card companies play just to take more money out of your pocket. You know, those nice people who offer to give you cards that will keep allowing you to spend on things you can't afford. They're helping you, aren't you wth all their rewards and cash-back incentive programs, you might begin to think that you are the one making money out of these transactions, not them.
Just to remind you that they are NOT your friends, I am going to give you a list of some of the worst practices engaged in every day by hundreds of credit card companies the country over. I have adapted this list from an article on MSN Money called Credit card companies' evil tricks, by Liz Pullium Weston.1. What is my interest rate? How much can I borrow I don't know about you, but because I am trying to get out of debt, I mainly throw my credit card offers through the shredder and pride myself on resisting temptation yet again. But, when it comes to a couple of my higher rate cards, I figure getting a 0% card and transferring the balances (depending on the transfer fee), may be a good idea. To do that, however, I need to know how much credit I am being approved for. And to get that information, and the real news on my interest, I have to apply even though I am pre-approved. But because they do not tell me what I am preapproved for in terms of rates or limits until after I apply, I do not have enough information to even think about this card.
Applying dings my credit score making me less likely to get good credit rates and higher amounts for even longer: my only goal in seeking out a new card. So, my advice is to just shred the offers. Liz suggests another piece of advice if you are looking for better terms: contact your current lender and negotiate for a card with a higher limit and lower rate. That has worked with us, but it does not get you down to 0%. I still scour offers and I may apply if I find one that offers 0% (or some low fixed amount) and clearly shows me that I am eligible for at least something close to what I need. If you know your FICO score, you will be in a good position to determine what you are likely eligible for by making a quick call (or using bankrate.com or lendingtree.com). My suggestion is to call someone from whom you have an offer and, instead of applying for credit, talk to them about what people with your scores are likely to get. Do not give out personal information such as social security numbers, but just get a rough estimate. Then, you are in a better position to know whether or not to apply for a card.
Don't just apply for any old card either. It doesn't look great to open and close accounts and some accounts are just not worth having such as ones that do some of the other things on this list.
The Credit Company Said What About Me on My Credit Report?The minute you are late, your report will be dinged. That is kind of fair; however, on time payments may not be reported. That may hurt you and not, on the other hand, help you. But one very important factor for your credit score is the amount of outstanding credit you have versus the amount you owe. Some credit card companies do not report a "credit limit" and instead, the way they report is on the basis of the bill: the credit company uses your highest reported amount as your "imit." This is a problem if you have never charged to the limit, but regularly charge in the neighborhood of 20-30% of your limit; in that situation, it always looks as though you are at 100% of the limit. even when you have plenty of credit left. Unless you charge up to the limit once to show the limit, you may be out of luck unless you attempt to get the lender to report your limit. According to Liz, if the Lender is Capital One, asking them to report your limit is useless.
When Did My Limit Become This Much This is the greatest scam going, if you ask me. A credit company that has promised you interest of x amount raises it simply because you are a few days late regardless of your generally stellar record. In fact, you may not even be late with that issuer; if you have had a late payment with another issuer, they can raise your rates: that's why you see those capitol one offers claiming that they will not raise your rates for one late payment or for anything you do on any of your other accounts. At least they are doing something right in that respect (if their claims are true --- I'm certainly not going to find out).
And the default is STEEP!!!! I'm talking 25%-29% steep. It is not only an outrage, I think it violates laws against usury but no one seems to pay much attention to all those old-fashioned laws anymore.
Now this is a problem you can avoid. You get the bill and pay at least the minimum that day (if you can afford it). If not, set up a date in the future, at least 2 days before it is due, for an electronic transfer. All the credit card issuers have web sties; what I do now is send 1/4 of what I am paying off on that card every week. Thus, if I am paying $100.00, I set up 4 $25.00 payments, with the last one about a week before the due date.
Since a completely skipped payment is more drastic than a late payment, if you are having a particularly hard time making payments for a reason, call the card companies and ask for a break -- I don't know of many with too much heart, but their default rates are a factor in how their busineses are evaluated; they'd rather work with you than have you default. Give it a shot, it can't hurt.
What's All This On My Bill?
All those extra charges, you mean? Let's say, you got this great new zero percent interest card with a limit of $1250.00 and rewards for gas. You put a couple of gas purchases on it the first month and decided, after the first bill came, to transfer $1000.00 to it. So, you transfer the balance and leave the rest for your monthly gas. As most people, you do not keep detailed records of each expense you put on the card; you were thinking of gas rewards, not limits, but you've been adding in your head roughly $25.00 each time and you think it's only been 10 times. Plus, banks don't let you go over your limit, you think, and you'll pay the bill at the end of the month. But, since it is a new card, the due date passes and the next day, you check it, realize it is late, and pay it.
That bill the following month will be extraordinarily high. First, you'll get socked with a transfer fee of 3-7%. (And the interest rate on what you transfered is not 0%). Let's say it was 4% or $40.00. On top of that is an over-limit fee of $39.00 and a late fee of $29.00. Thus, you are effectively paying. Before you even pay your monthly interest rates, you'll owe the bank about 37% of your transactions in fees! Now that 0% plus gas rewards looks like much less of a good deal.
Now, you could have avoided all of that if you had understood that the transfer is probably at regular interest and you will pay for it. You might also have kept a budget and records to avoid going overlimit; finally, you could have paid on time. But, you didn't, and the bank was counting on the fact that you wouldn't -- and here you are.
Why am I Paying Interest Twice on the Balance Transfer?This is really wrong (as if the others are right, but you get what I mean. Many times you are charged interest from the new issuer as soon as the check is issued; however, you are paying interest to the old issuer until the check clears. And the new issuer is not out any money until the check is available for use by the hird party. That's a rip-off plain and simple. there's no other wayt o see that. Different banks have different policies, so you may want to ask. You might also want to let it go: it doesn't amount to much financially. Finally, you can insist on electronic funds will be transfered and cleared more quickly than checks.