What You Don’t Know About Credit Cards

Credit card companies are forced by law to divulge all the necessary information and the scheduling of their fees to every customer. However, a lot of that information is passed on to the customer through the fine print that can be found in your first statement.

Rarely as consumers do we read all of that information and a lot of us just pass it right through the paper shredder almost instantly. That is why we frequently don’t understand where certain charges come from, and have no idea what could hurt us when it comes to our credit cards. Stop being hurt by misinformation and read through these 5 things that you were never told about credit cards.

1. Transfer Fees Usually Come with a 0% Balance Transfer Offer

Many credit cards dangle an offer of 0% on balance transfers for a set period of time, but often hide the 3-5% balance transfer fee that comes along with it. If you transfer a balance of $2,000 from another card to your new card, you will end up paying close to $100 in transfer fees. This may end up being less than the interest you would pay on your old card, but is something to keep in mind.

2. Credit Cards Do Not Always Come with a Grace Period

The majority of consumers are used to having a grace period with their credit cards. That is the time in which they can use their cards, pay off the balance, and not incur any interest at all. Most cards have a grace period of 20-30 days but it is becoming more and more common for card companies to shorten their grace period or not offer one at all.

3. Two Cycle Billing Can Cost a Lot

There are three calculations that are used for credit card interest, including average daily balance, adjusted balance, and the two cycle billing method. With the two cycle method your interest is calculated using the purchases you made during the current cycle and the purchases that you made during the previous month. That is true even if you have already paid off your balance, so be sure to find a credit card that has great rates but also offers adjusted balance methods.

4. Low Minimum Payment Rates Means More Money

If you have ever owned a credit card in your life, then you already know how expensive it can be to continue making only minimum payments. Your fees and interest often build faster than you can pay it off, leaving you paying off debt for years. Now credit cards are coming out with minimum payment rates of as little as 2%.

Just because you can, it doesn’t mean you should.

5. Universal Default Means Increased Fees

Many credit card companies are now working with the interest rate raising method of universal default. This means that if you miss one payment on any of your credit cards, your rates will increase on each and every one of the cards you own. Miss a post-Christmas credit card payment on your Visa and you will end up paying more on your American Express, Mastercard, and Discover card.

Credit cards are there to help us out in emergencies, make purchases over the phone or online, and keep us protected when things are falling behind. When you use them correctly they can be a major benefit in your life, but if you do not understand how they work, avoid reading the fine print, and do not keep yourself informed, you can end up paying far more money than is necessary in the long run.

Steven Millstein

Steven is a personal finance guru with more then 20 years experience helping individuals and families improve their financial situation. Make sure to visit his personal blog, Credit Zeal, for free help and advice with credit repair and debt management.

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