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| Debt Discussions about debt and how to deal with debt. |
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05-04-2009, 07:14 PM
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7 Credit Card Company “Tricks” and Debt Reduction
There are several things you may or may not know about credit card companies and the “tricks” (read fine print) they use to increase their fees, hence revenues for their company coffers.
1.) Almost all credit-card companies will periodically review your credit report looking for late payments on other cards. Why? Because it is an opportunity to raise the interest rate on their card, perhaps by a dramatic amount. Being late on another card, in their eyes, could be a sign you're having financial problems. Therefore, be sure to watch your credit report carefully and make all payments on time to avoid a domino effect on your other lines of credit. 2.) You might think that when someone offers you a fixed-rate card, the rate is indeed fixed. However, you would be wrong. A fixed-rate card simply means that the company needs to inform you in writing at least 15 days before changing its rate. Therefore, pay attention to the notices that come with your bill. And if you carry a balance, always be aware of the interest rate you're paying. If it goes up, it may be time to shop for a better card. 3.) Have you looked carefully at your credit-card statements lately? These days, not only are payments due by a certain date — they're often due by a certain time, like, say, 3:00 p.m. And a late payment could really cost you. Not only will you be charged a late fee (which could be as high as $35), however you may also be charged a penalty, which is far more costly. Indeed, you could see your rate soar to 34.9%, and that new rate may be permanent, according to Consumer Action's survey. 4.) The key to paying down your credit-card debt is to make payments early and often. Any extra cash you can squeeze out of your budget needs to be applied toward this debt. That's the only way to whittle down your principal. Unfortunately, the credit-card companies are making it easier than ever to carry your debt endlessly by reducing the amount they require as a minimum payment. While it used to be that you had to pay off at least 5% of your total balance each month that requirement has now dropped as low as 2% on some cards. At this rate it could take you decades to pay off your debt, even if you never charge anything more to your credit card. 5.) The grace period — or window of time before you begin accruing interest on new purchases — is also shrinking. While it used to be 30 days, it's now shrunk, on average, to less than 23. Some cards don't have any grace period at all. Of course, if you carry a balance, there are no grace periods, so it doesn't really matter. But if you pay off your bill each month, looking for a card with a grace period of at least 25 days could save you from unnecessary interest payments. 6.) Using your credit card in a foreign country used to be the best deal in town. That's because, while Visa and MasterCard charged a 1% fee, it was still significantly less than what you'd have to pay if you exchanged currency at a bank or used travelers’ checks, and you usually got a better exchange rate to boot. These days, using a credit card overseas is still a good deal — but it isn't quite as sweet. The issuers have tacked on an additional fee — usually 1% to 3% — in addition to the Visa and MasterCard fee, according to Consumer Action's survey. So a purchase might be more expensive than you thought. 7.) Just because you are preapproved for a card does not necessarily mean that is the card you are going to get after you apply. Once your credit history is reviewed by the company, you might be sent a card with less favorable terms. Therefore, be sure to review a new card carefully to make sure it has the terms you expected. If you decide you are not happy with these terms, you can simply not activate the card and close the account. If you find yourself in what call “the debt trap,” your inability to pat down on the debt you owe, take a closer look at a debt reduction or debt settlement company. These companies, like Nationwide Debt Reduction, can help you cut your debt often by 40% or more, helping you to become completely debt free, often in 3 years or less! 
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