Hidden Secrets You Should Know About Your Credit Cards

This isn't going to be one of those articles telling you how dumb you are to still be using your credit card. Times are getting tougher and sometimes it's necessary to pull out the plastic and use it. Heck, if you're a knowledgeable credit card user, you can even get paid to use your card.

What I am going to tell you is that there are small secrets hidden in your credit cards terms of service that you need to make sure you're aware of.

With a credit card, you are required to pay the balance in full each month. Essentially, they are a short-term, interest free loan, which can be a great way to stretch you finances. Interest is then applied monthly on the unpaid, carried over balance in addition to any new purchases made, until you've reached the max of your credit limit.

But the real problems begin when you can't pay the borrowed amount off in that first month and are stuck paying on an unpaid balance from month to month. This is when the hidden terms along with the higher interest rates can really begin to hurt you.

The minimum payment due is usually a small manageable amount but the interest can be more than that payment. So your balance will just keep rising if you continue to pay just the minimum. You could end up spending the next 10 to 20 years paying off that "original" purchase of $500.00 or more by paying more in interest than the original item cost. You can get into even deeper financial trouble when you miss a payment, your payment is late or you go over your limit. The fees charged for these transcriptions can be larger than the monthly payment amount.

It's these "secret" terms and fees that can get you into the biggest financial trouble. If you're unsure what the terms are for your credit card you need to ask. The terms may have changed since you opened the account originally and you failed to see the notification in your monthly bill. Credit card companies can change your interest rate at anytime, provided they give you 15 days notice. Thinking that you have a "fixed" rate set up by the card company is wrong—the rate can change anytime. Knowing the terms and possible penalties you could be facing is important to keep your credit rating in good standing.

Some of the things you need to know about your credit card is:

· Your current interest rate.
· Is this a temporary rate or a fixed rate?
· Are there different rates for balance transfers, cash advances and purchases?
· What is the order that payments apply to different types of transactions? Some banks pay off low interest-rate balances first so the high-rate ones stay on your account longer.
· Can the rate increase to a higher penalty rate and how? Does the payment activity on your other credit cards affect this one?
· What is the annual fee (if any), the late fees and over limit fees and when are they charged?
· What other fees can be charged and under what circumstances?
· What is the grace period or number of days from the billing date you can pay in full without any more finance charges being added?

Some other terms that can play havoc with your credit are:

· Universal Default This takes place when, among other things, you make a late payment to any creditor (even utility companies) even though you have made your credit card payments on time. The credit card lender places a higher "penalty" interest rate on the card, which is often more than double the original interest rate. The theory being is you've failed to pay something once; you just might fail to pay them. Other things, which can cause this default to go into effect, are a decreased credit score or exceeding the credit limit on another loan.

· Double cycle billing This is when lenders charge interest on credit card debt a holder has already repaid. For example, a person charges $200 on a credit card in March and makes a payment on time of $190, expecting to pay interest on the remaining $10. When the next bill comes in April, instead of the remaining balance of $10 plus that interest, you find that you've been charged interest on the $200 plus any other purchases made in March, even though you've already paid 99% of the balance on time. This is the one to watch out for when you're asking how billing is figured.

· Junk fees This is something you must really watch out for because issuers charge hefty "creative" fees for processing accounts that are sometimes way out of line.

Examples:
v Extra charges for paying on time by phone or online.
v Charges of 3% on balance transfers and cash advances.
v Approval of transactions over the credit limit but then the credit card company charges you an over limit fee.
v Charges for an account set-up.
v A participation fee.
v An annual fee (unless a condition of getting the card).
v Program fee.

If you question your credit card lender about any of the above items and aren't satisfied with the answers, maybe it's time to shop for a better card. Ask plenty of questions to be sure you understand all the costs and terms involved and then, pick the best deal.

It's better to get all the answers up front than to get slapped with a high interest penalty that you can't manage.

Ruth Walby

To learn more about getting out of debt, managing your credit cards and finally having money to enjoy life, visit
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