Credit card companies sucker new customers in with teaser interest rates; fantastic cash back offers; free airline miles, free gifts and promises of easy credit. But then reality sets in and there are bills to pay. And, surprise, the low rates and perks are gone.
One day you check your bill and find that two thirds of your debt are interest charges.
Suddenly free money is not so free at all.
Find out the most common under handed tricks your credit card company uses to scam you out of money.
1. For whatever reason, credit card companies are allowed to make up their own credit lending practices. And, that can cost you thousands of dollars in fines, penalties, late fees and interest charges. By law, credit card companies only need to give you fifteen days notice before changing their terms or raising interest rates. Your only option is to pay off your credit card before the new rules kick in or simply deal with it.
2. Under a new practice, called universal default, credit card companies are allowed to classify you as a bad credit risk and subsequently they’re free to spike your credit card interest to as much as 30% or more, even if you’ve never missed a payment.
Most times this happens, when you are late paying for a common household expense such as electricity. Just another way credit card companies swindle you out of money.
Just to be safe, set up your household bills to be paid automatically online. You can have your current bills deducted from your online debit card or bank account. This ensures no late payment or nasty surprises on your credit card bill at the end of the month.
3. Reject credit cards that use a two-cycle billing plan. Traditional credit cards use the average daily balance method of interest computation, so you won’t incur any interest charges on purchases during the first month. In other words, you’re getting an interest free loan from the credit card company.
You could easily buy anything you want and pay it off within thirty days, using the credit card’s money and incur no interest charge fees.
But this sweet deal is not available on all credit cards. Some credit card companies have switched to the two cycle billing method, so now all your purchases are charged at the current interest rate from the moment you complete the sale.
4. Watch out for hidden fees. Even if your credit card company doesn’t charge an annual fee, they may bill you for other activities, such as talking with a live customer service representative or even receiving a printed statement in the mail. Late fees and over the limit charges can cost you up to $39 each.
Balance transfer fees can cost as much as 3% of the amount transferred. All these charges are added on top of your debt at the current interest rate.
And, if your available credit balance is not sufficient to absorb the new charges, an over the limit fee can be applied.
5. Rewards programs may seem like a good deal until you realize how much money you would have to spend to reap the benefits. Additionally, some financial experts suggest that frequent flyer bonus miles earned from credit card use may soon have an expiration date.
In a bad economy where many consumers are defaulting on their payments, many credit card companies are looking to limit their own expenses by cutting reward programs. In the case of bonus miles, you’ll need to use it or lose it.
Once the credit card companies change the rules, all that money you spent to earn those frequent flier miles will go down the drain.