Credit Cards Blog

You may love your credit card, but once you're hit with a rising interest rate, you'll find out it may not love you back.

If you think about it, you've got a close, intimate relationship with your credit card. The both of you have been inseparable through each daily transaction. You treat it right by paying off your monthly balance on time. You know all your card's important details, such as its credit limit and interest rate, right down to memorizing every reward and benefit.
You might even know your card number by heart. Unfortunately, there's some bad news that could be financially heartbreaking:

Your credit card company may be holding out on you.

The fact is, you've been kept in the dark about several secrets because your financial benefit comes at your card issuer's financial loss. Read on to find out some of the things your carrier doesn't want you to know.

1. Fixed rates aren't really fixed.
Issuers can raise your APR whenever they choose. This information isn't necessarily a blatant secret, but it'll be hidden so deeply in the fine print of your cardholder's agreement that card companies are hoping you miss it. Commonly, we're enticed to sign on with a fixed introductory interest rate that may change at the company's will. You have the right to be notified 15 days before a potential rate increase, but to stay on top of them, check your mail; you'll receive notifications in a thin, discreet white envelope.

2. One late payment ... two penalties.
In a perfect world, one late payment equals one penalty fee; on-time payments equal zero fees. In this imperfect world, you can be penalized with two surcharges on one delinquency, and you won't know about them until you've been charged. These can come in the form of a late fee (up to $35), and a penalty rate -- a permanent interest increase that can jack up your APR to as high as 29.99 percent! The 2009 CARD Act sought to place limits on these increases, though the details aren't widely known by the average cardholder.

3. Twice the interest in one month.
Another one-two financial punch comes in the form of a legal maneuver which allows your card company to impose two months' interest for just one month of late balance payments. For example: You're charged twice the interest for a partial balance payment in October even though you paid on time in September. Called double-cycle billing, the card issuer looks at your average daily balance over two consecutive months and charges you higher interest based on the month you carried a higher balance. It's not even the interest that makes this a problem, but the principle of being punished for good financial behavior.


4. Disgraceful grace periods.
How many of us who've made big-ticket purchases have been thankful for the grace period? Say you charge $1,000 to your card and pay $250 by the due date to hold over your creditors. Most cards carry grace periods up to about 25 days, allowing you to pay off the remainder, interest-free. But in the spirit of profiteering, many providers are reducing the grace period to just 20 days, while some are doing away with them altogether. That means you'll get charged interest on every purchases, even with timely repayments. Avoid this fall from credit grace, and check how many grace period days your card company offers.

5. No card limits - just with limits.
Many consumers in possession of a no-limit charge card discover they have a revolving spending cap -- let's use $5,000 -- but only learn of it after racking up $7,000 in purchases, leaving them stuck with a remaining $2,000, plus interest, to pay off. Why is this so? Your card company advertised your plastic as no limits, but it's really set at a no preset limit, based on your own month-to-month spending behavior and habits. Before snatching up a no-limit card, ask your provider if the limit is predetermined, and be careful not to spend beyond that amount.

6. Minimum payments to the maximum.
It's the nature of the credit beast: The longer you stay in debt, the more interest credit card companies can charge, and the more money they make. In the past, card holders had a 5 percent minimum monthly payment. This became problematic for creditors because people were motivated to pay off their balances more quickly. So they lowered the monthly minimum to 2 percent. But now, with smaller repayment requirements, we're prone to spend more and accrue more debt each month. Experts maintain that this move by card companies adds thousands of dollars in interest, creating a repayment schedule that could last years, if not decades.

7. Late payments to any creditor can raise your APR.
We hope that our creditors aren't wishing us to slip up on our repayments, but if there's one thing to take away from this article, it's to be on time paying down your debt. One late or partial payment, be it your credit card, car or mortgage payment, can jack up your total APR across each line of credit in your name. Can you imagine your auto or home loan going from 3 percent to 29 percent? Just like we've got the CARD Act, creditors have something called the universal default clause, which insures them against people who pose a credit risk. (Not like they need it.)

Write by: Paul Sisolak

Here are the top 10 credit card mistakes from financial experts :

1. Getting too many
Bypass the shredder and you could make one of the most common credit card blunders by collecting too many credit cards.
"Ask yourself," says Williams, “ ‘Do I need another credit card?' Probably 95 percent of us don't need another one to keep in the sock drawer or in the little metal box in the kitchen."
Howard S. Dvorkin, founder and president of Consolidated Credit Counseling Services, a nonprofit debt management company in Fort Lauderdale, Fla., agrees. "The worst mistake is that people don't know when to stop. Too many credit cards is not a good thing."
Even if the cards have zero balances, multiple open accounts could cause a lender to question what could happen if the account holder gives in to temptation and maxes out on all that plastic.

2. Misunderstanding introductory rates
But, you argue, that new card will help you manage your money better because you can transfer other balances to a no-interest account. Welcome to credit card mistake No. 2: being misled by introductory rates.
"People don't look at what the rate's going to be once the teaser is over," says Daniel Wishnatsky, certified financial planner and owner of Special Kids Financial in Phoenix. "The assumption is that it's going to be a reasonable rate. But with these particular loans, it's not unusual for it to go up to 18 to 20 percent. They're surprised six months later when it expires. But if they'd done their homework, they wouldn't be."

3. Not reading the fine print
That homework is reading the offer's fine print. Not doing so is credit card blunder No. 3.
That tiny text insert is where you'll discover when the zero-percent or very l ow interest rate expires. It's also how you can find out about any balance transfer fees, as well as any offer limitations. In most cases, the introductory rate applies only to balance transfer amounts or new purchases for a certain period of time, says June A. Schroeder, a CFP with Liberty Financial Group Inc. in Elm Grove, Wis., a private financial planning and advisory firm.

4. Choosing a card for the wrong reasons
You might be tempted to ignore the fine print because the card has other attractions, such as a rebate or rewards program. Don't, or you'll make credit card mistake No. 4: choosing a card for the wrong reasons.
"Credit card granters are not a consumer's friend. It is a business," says Dvorkin. "They don't know what's right for you. Their job is to extract as much money from you as they can. Your job is to not let that happen. People need to go through and find a card that's right for them. There's every sort of card out there -- points, cash back, donations to your college."

5. Not rate shopping
Look for the best possible interest rate. Not shopping around is credit card mistake No. 5.
It's especially important to note the rate on unsolicited offers. If you're struggling financially, you're not likely to get the most favorable rates or terms. You'll be paying higher interest rates. So comparison shop for a credit card.

6. Making minimum payments
OK. You do need another card. You read the fine print, you completely understand the terms and you got a competitive rate. But even after choosing the perfect credit card, people still make mistakes, such as No. 6 on our list, making minimum-only payments.
"Credit cards are not a form of supplemental income," says Dvorkin. "They're for convenience, and should be paid off at the end of every month. Paying the minimum is not going to get you anywhere. It's going to get you in trouble, that's where it's going to get you."
And it's going to get you into trouble for a long, long time. "People don't realize how difficult it is to pay off loans at a high rate," says Wishnatsky. "You're going to be paying it for your next three lifetimes."

7. Paying your bill late
Making late payments, blunder No. 7, is better than not paying at all, but not by much. Not only will you face a late-payment charge, which could be higher than your minimum payment, your tardiness will show up on your credit report, damage your FICO score and make it harder to get better terms for future loans and accounts.
Check your account statement for the due date and make sure you send your check in plenty of time. But the date alone isn't enough, says Liberty Financial's Schroeder. Some companies have cutoff times. If your check arrives on the 22nd as required, but in the afternoon mail, your payment is counted as late because your account terms called for payment by 9 a.m. that day.
If you've set up an automatic payment via your bank, make sure the time and date are taken into account, says Schroeder. And find out your bank's payment policy when the due date falls on a weekend or holiday.

8. Ignoring your monthly statement
You can avoid late payments by checking your credit card statement. Not doing so is mistake No. 8. Checking your statement will help you pay your bill promptly, as well as allow you to make sure that the charges on it are correct. "In these days of ID theft, you need to check your bills religiously," says Schroeder. And you need to do so as soon as the statement arrives. If you wait too long to dispute a charge, says Schroeder, "you're essentially accepting it."

9. Exceeding your credit limit
Checking your statements also can keep you from exceeding your credit limit, mistake No. 9. "If you're near the top of your credit limit, try really hard to pay in cash for subsequent purchases or get an increased credit line," says Schroeder. "If you don't, you'll get over-the-limit charges, which are costly and look bad on your credit report."

10. Buying things you don't need
Careful statement examination also could prevent the 10th credit card blunder, using plastic to purchase things you don't need."Go over your credit card bills every month and you'll be amazed at the number of items that, upon reflection, you could have done without," says Wishnatsky. "It's surprising how many purchases we make that we think are needs, but are impulse buys."
The Phoenix financial planner tells his clients who are considering a significant purchase to wait 48 hours, if at all possible. "If you still want it, wait another 48 hours," Wishnatsky says. "Then if you have to get it, then get it."
Also use your statements to help you create a budget. Wishnatsky realizes many people cringe at the "B" word, but he says control of your spending and your credit card usage doesn't have to be a way to deprive yourself. Instead, it can be a way to make things happen in financially positive ways.
"Once you get control, even to a degree, it frees you from this constant money worry," says Wishnatsky. "You might find there are things that you can actually end up having if you just have a plan, if you get your financial desires in tune with your financial resources."

That's all other knowledge about credit cards, hopefully useful for you!


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