Six traps that snare even the best credit card customers
So you think you're a good credit card holder? You live within your means, you don't have too many cards, and you pay your bill every month? You might have the virtue of a nun, but the credit card issuers will still find a way to to take a swipe at you. Here are six things that even regular paying cardholders should look out for.
Floating due date
Think you know when your credit card is due every month? Pull out the a stack of recent statements and check. My card's due date has fluctuated between the 15th and the 18th of each month. Credit card statements are not like rent; they don't necessarily fall on the same day each month. This month, for example, Discover moved its due date up by five days and expected cardholders to know about it. Don't get it in your head that your payment falls on a certain day each month, because it may bounce around, and that sets you up for a hefty late payment fee and, with enough of them, a hit to your FICO score. To thwart this trap, mark your to-do list with "pay the credit card" a full week before the range in which it's actually due.
Almost a month
You pay your bill on April 1. On May 2, you pay again. Guess who's getting walloped with a $40 late fee? Even though you diligently made payments a month apart, many cards will penalize you for this otherwise model behavior because in their eyes, you're a day late for that cycle. It was 32 days -- almost a month -- between payments, but actually just a hair over, which makes you delinquent, not the model budgeter you actually are. Here, the advice is the same as before: Just re-shuffle your schedule. Add "pay the credit card" to your monthly calendar, and always put it about a week before the period when it's usually due. And don't procrastinate your payment.
Buying for rewards
Even if you pay your bill on time, if you're making purchases with credit instead of cash because you think there's some side benefit, don't. Pay cash instead. Studies have shown that shoppers who use rewards cards spend more money than shoppers who don't.
Not checking the bill
Vendors are always hatching nefarious plots to sneak under-the-radar agreements into the fine print of routine purchases. It's easy to accidentally buy a magazine subscription you didn't realize you were signing up for, or scammers could be testing the health of your account with puny charges before returning for the big kill. Good customers pay the amount they're supposed to, but if you're not taking the extra step of identifying every charge on your bill, you're inviting unpleasant surprises. Yes, it's painful to be confronted with the spending you've done. But it's much worse to be confronted with spending you haven't done.
Accepting store credit cards
Even if you pay them all off on time, the simple act of applying for one can potentially lower your rating. Having lots of open credit accounts negatively affects a credit score. Unless you're getting a major discount on a big-ticket purchase worth thousands of dollars, the incentives and come-ons for taking out an in-store credit card almost certainly won't be worth the risk of taking a hit to your credit. Use your standard credit card for store purchases if you must, but cash is still king.
The minimum-payment trap
Paying your monthly minimum payment keeps you from buckling under penalties, but it's still a suggestion by a company that ultimately wants to bleed you for years. You should already know by now that adhering to the monthly payment just plays into their hands. At 18% interest, a $2,000 debt will ultimately cost about $4,600 and take 19 years to pay off under a typical minimum-payment plan. Don't trust your issuer's suggestions when it comes to debt. It wants you to stay in debt. Pay as much you can.
Reader Comments (Page 1 of 1)
6-11-2009 @ 8:53AM
Donovan said...
Ah yes. These credit card issuers/banks really use every available tactic they can think of to keep a credit card holder in hock.
If you pay your balance down to low, they raise your interest rate usually a balance of $3000,00 or less. So, if you think your doing yourself a favor by sending in that larger then minimum payment. Nine chances out of ten. Its going to back fire on you, with a higher interest rate on your next billing statement.
And have you noticed that even though you may be mailing your payment a day or two after receiving your billing statement, its taking 10 to 12 days for your payment to clear, and post to your account. Its not slow mail people. Its your payment just being held by the billing department, for those few extra days of interest they can collect.
Were also told that by paying off, and closing a long time account. Will have a negative impact on our credit score. Well yes it will, by a few points. However, If these card issuers start charging annual card fees. Even though your account may be paid off, and have a zero balance. As long as the account is open. You will be charged the annual card fee. So, either way your going to pay. Either a reduction in your credit score, or the annual fee.
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6-11-2009 @ 2:45PM
jan said...
About a year ago my credit was a mess from medical bills and some overspending on my credit card. If you've never had that problem you can't believe how it messes up your life. It's hard to buy any big ticket item or even get a good job with bad credit. I found a blog, http://fastcreditrepairs.info ,that really gave me the information I needed to get my credit and life straightened out. It helped me so well that I was recently able to buy a car and pay the lowest interest rate possible. If you have credit problems you might want to check it out
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6-11-2009 @ 6:27PM
afton529 said...
I strongly advise you not to mention the advantages of carrying cash when the disadvantage of carrying cash clearly outweighs the advantages is because you are most likely being targeted by homeless people who beg for cash. They treat you like a portable atm machine and they will eventually try to get into your face with that attitude. You pretty much don't see how most homeless people frequently loiter around the banks, even napping near atm machine where customers make their usual withdrawal. Also, think of the other risks of carrying cash like a hold up style robbery by thieves who need cash to support their alcoholic or their drug induced binge. I feel safer carrying my atm or credit card around in place of cash, secured and not visible.
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6-15-2009 @ 4:00PM
theresecurry said...
i just receive my statement from citi card and i just cant beleiveit but true i send my payment on time because i forgot the0.87 cent when i wrote the check they say i was late and charge me a late fee39.00 plus raise my interest rate to 29.90 from 17.50 and before that 9.00 i always paid that bill on time have the card since 1985 i am already struggling right now when icall they told me they will review my interest rate in 9 months what can i do
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6-15-2009 @ 5:02PM
Jason Cochran said...
Theresecurry, credit card companies are being pretty bloodless about doing things like that these days. They're desperate. Technically, it has the right to raise your rate, because technically, you were delinquent by 87¢, and delinquency of any amount is not permitted per your cardholder agreement. However, I know from experience that you can often call them and talk them into removing charges that seem to stem from obvious human error. After all, the person on the other end of the line is a person, too. It all depends on whether the company is willing to bend the rules to keep you as a customer. I have been able to waive $39 fees the same way. They may give you a song and dance about this being the last time they can help you, but they may do it. Give it a try. You will probably be stuck with the new, higher rate, though. It happens to the best of us. That's why is so very important to pay on time each month.
Afton529, I disagree with you. I don't advocate carrying around wads of cash at all times, but for big purchases, it's always the wisest course to only spend what you have and not to dig yourself into a credit hole. I don't know where you live, but here in the wilds of New York City, we aren't besieged by drug addicts who attack us like zombies in a horror flick. Only carrying credit cards -- and nothing but credit cards -- because you're afraid of all homeless people isn't just bowing to the most simplistic of stereotypes, but it's also living in the grip of fear.
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6-22-2009 @ 1:01PM
TeacherTeacher said...
We Americans have been very careless and irresponsible. We have, in essence, trained credit card companies how to treat us. We now have credit card companies and banks using highly questionable tactics to "steal" money from our back pockets when we aren't looking....and, we do nothing. We don't call our lawmakers, we rarely call our credit card companies and banks; we don't cancel our credit cards; we just sit and complain and continue to charge. The banks are fully aware of our habits and passivity. They know we are in fear of losing a few precious points off of our credit scores and they know we won't cancel our cards for that reason. They know we are scared that we might need that credit card someday. They know we will forget about being mad at them because we are such busy people. Personally, I have cancelled my American Express card. I no longer will give my hard earned money to a company who uses highly questionable tactics to raise its profit margins. I also didn't like having to call into a foreign country to speak to someone about resolving issues I had with my credit card. I think American Express should change its name to American Exploit. As an American, I am tired of being ripped off. I now vote with my pocketbook on whether or not I will use a company's services or products. I am teaching companies how to treat me. Maybe more Americans can do the same.
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6-23-2009 @ 2:08AM
Jasonagoodlin@aol.com said...
Check out what I experienced six year ago with Identity theft.
http://magicwriter.blogspot.com/2009/06/identity-theft.html
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6-26-2009 @ 10:05AM
Sue Bell said...
In 1979, we opened a mastercard with People's Bank in Connecticut and it was bought by RBS in 1992. Our bills are always sent in 10 days ahead of time and we seldom carry a balance. Our interest WAS 8.99% until yesterday. We were informed that they have reviewed our account and starting with the July 1st billing, our account's interest rate will be changed MONTHLY!.. I called RBS and told them that we are not closing our account and will still pay the annal fee but we can no longer do business with them. My credit union has a credit card for 6.99%.
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6-28-2009 @ 1:35PM
STEVE LAZO said...
Chase now changes the terms of payment from 2% of the balance to 5% of the balance on their credit cards. I find this immoral in these times of overwhelming economic stress that has the entire country losing sleep over how to pay their ever increasing bills with ever decreasing money. Especially after the bail out these banks have enjoyed from the current administration, I cannot understand why the little guy doesn't get the chance to catch up by abiding by the original cunsumer agreement. I'm on a fixed income and can't afford that. This would raise my payment to over $1,000 a momnth, i was paying them $100 over the minimum payment all the while, no\w i cant afford it, im not working. Is this fair to the thousands of people in the same boat as im in?Why raise it from 2% t0 5% ? theres going to lots of bankruptcies coming up. what can I do??
http://www.consumeraffairs.com/credit_cards/chase_credit_cards.html#ixzz0JkLLeoL5&D
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7-06-2009 @ 2:02PM
Jennifer@jenniferjohnson.net said...
Are there any honorable credit card companies? I would like to close out all my current credit cards and only do business with a decent company. Does anyone know of a company that has decided to behave well towards its customers?
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8-18-2009 @ 7:37PM
Joseph said...
Listen people IF you are carrying a credit card balance month after month - then you are living beyond your means.
A rule : if you can not pay back a high ticket item within 6 months, then you're not financially responsible.
I can hear the 'voices' of the people objecting to this statement. But I believe they are the same people that bought too much house and now are stuck
or
are shopping junkies. If your garage is filled with stuff instead of your car then...........
You can only blame yourself!!!
In an environment where the Banks were given so many millions of our tax dollars and then 'attack' us with unfair fees and charges it is time to respond appropriately. PAY OFF YOUR BALANCES and then NEVER PAY AN INTEREST CHARGE AGAIN.
The banks AND other companies (utilities, cable,etc) are contributing to lower spending which equates to lower sales, lower sales tax collected and lower stock prices.
YES your GREED will hurt us all.
The reason many Countries are laughing at the failure of CAPITALISM.
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8-24-2009 @ 2:22AM
sean said...
I've carried around thousands and never been accosted by drug fiends or homeless people. I've even walked through projects and places where your average white guy is going to get beat down for being white. What keeps me safe is not what I have in my wallet, and not the guns that I leave at home, but that I'm not constantly riddled by these crazy fears.
Maybe we should go back to the old days with cash only and guns. Everyone gets a gun and nobody uses plastic. You're not going to have the balls to rob someone, because you'll likely be killed in the attempt. I also think drug use would drop dramatically, as the drug addicts killed each other off.
The negative effect of this idea is that a pocket full of cash and a gun won't get you a house. Loans are necessary in an inflated economy because larger items will remain out of reach for most people. If you 'buy what you can afford', most people won't own anything.
Lastly, what's good for the people, is good for the businesses. So what if it takes 2-3 weeks for your boss to wrangle up enough cash to make payroll. You can get by. (Some businesses borrow in order to make payroll and supply costs.) And if the payroll delivery is robbed, you're SOL.
I'm being sarcastic for a reason. Banks provide services, and those who have exploited them, are the reason we're paying. The people with a house that costs $100,000 more than they needed, the people that get cars you eventually see on tow trucks. The people that have their bank accounts closed because of negative balances.
I had a different idea. We wipe out overdraft and overlimit fees, but you go to jail if you exceed your funds by more than $100. If you steal $100, you're going to jail, so why not with that situation.
That would make people honest, for fear of 'real' penalties, and America would take its head out of its collective @$$.
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