Today, we’re diving into something that affects nearly everyone—credit cards. Almost all of us carry at least one, whether it’s for personal use, business, or travel. But did you know there are things credit card companies don’t want you to know? Yep, there are some hidden tricks that could cost you a lot of money if you’re not careful.
Let’s walk through the six things credit card companies hope you never find out:
1) Your “fixed rate” isn’t truly fixed
Most people think that a “fixed rate” means their interest rate will never change. While it’s true that the rate won’t change with inflation or prime rates, it can still go up. If your credit score drops or you miss payments, your rate can increase. So even though it sounds secure, always check your statements and be mindful of how you manage your credit.
Real-Life Tip:
Let’s say you miss a payment on your credit card. After missing just one or two payments, your “fixed” APR can rise, making it even harder to pay down your debt. Stay on top of your payments to avoid this!
2) The “45-day notice” doesn’t mean you have 45 days
When credit card companies plan to raise your interest rate, they’re required by law to send you a notice 45 days in advance. But here’s what they don’t tell you: on the 15th day after they send the notice, any new purchases you make start getting charged at the new, higher interest rate. So you don’t really have 45 days at the old rate. That’s why it’s smart to stop making new purchases during that time if you can.
3) They profit when you’re in debt
This one is huge. Credit card companies make the bulk of their money from interest charges. In 2022, they raked in $130 billion, and $105 billion of that came from interest alone. The truth is, they make more money when you don’t pay your balance in full. So while they may offer rewards and perks, they’re still hoping you’ll carry a balance so they can charge you interest.
Real-Life Scenario:
Imagine having a $1,000 balance on a credit card with a 24% interest rate. If you only pay the minimum, you’re paying the company way more than $1,000 over time. Always try to pay more than the minimum to avoid falling into this trap!
4) You can negotiate
Credit card companies aren’t completely heartless. If you have a good history of payments, they might be willing to work with you. You can request a lower interest rate, change your payment due date, or even ask to have a late payment removed from your credit report. It’s worth asking because you never know—they just might say yes!
5) Hidden fees are everywhere
Credit cards come with lots of fees that can sneak up on you. Here are a few common ones:
- Annual fees: Some cards charge you just for having the card, especially those with travel perks or cash-back rewards.
- Balance transfer fees: When you move a balance from one card to another to take advantage of a lower interest rate, you may have to pay a transfer fee.
- Late payment fees: If you miss a payment, you could be charged $30 or more in fees.
- Foreign transaction fees: If you travel abroad, using your credit card might result in extra charges. If you travel a lot, it’s worth looking for a card that doesn’t charge foreign transaction fees.
Tip:
Always read the fine print and understand what fees you might be charged before you choose a credit card. Some fees might be worth it if you’re getting great rewards, but make sure it aligns with your financial goals.
6) Merchant processing fees affect consumers too
Credit card companies charge businesses every time you use your card to make a purchase. While large companies absorb the cost, small businesses sometimes pass this fee onto customers or require you to spend a minimum amount. If you’re shopping at a small business or farmers’ market, it’s a good idea to carry some cash just in case.
Final Thoughts
Credit cards can be a great financial tool, but they can also lead to debt if you’re not careful. Now that you know these six things, you’re better equipped to use your credit card wisely. Make sure you’re paying attention to your interest rate, keeping fees in check, and paying off your balance whenever possible.
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