How To Avoid Tricky Credit Card Fees
No matter how good you are with managing your credit cards, you've likely been charged aggressive fees at least once by your lender. Even if you are good at managing them now, chances are that you've learned your lesson the hard way some time in the past.
Here are some tips of tricks that credit card companies like to play. Of course not all companies have the same policies, but these are some to be aware of:
* They are allowed to move your due date without notice. Right, so every once in a while they might move your due date up by a couple of days to try to trick you up. If you are used to having your bill due on the 10th for a long time and then suddenly it is due on the 8th this can mess up the most organized of money managers.
* Sometimes they will cancel your auto-payment if they have received an additional payment in the same month. They say that this is to "protect" you, assuming that you wouldn't want to pay more than once a month. In my opinion this is just to make sure you aren't paying off as fast.
* They will also not allow you to make consecutive payments; making you wait 5-14 days between payments. This adds to their bottom line and makes it more difficult to manage payments.
* They make it hard to set up auto-pay, in hopes that you will not be able to manage it yourself.
* They hike up the rate at any opportunity (late payment, bounced payment, just for the heck of it!)
* Setting bill due times at noon, so even if you pay on your due day you are already late. For this reason it is a better practice to schedule payments for the day before the bill says that it is due. Also make sure that if the due date falls on the weekend, pay on Friday instead of Monday to be on the safe side.
* Applying payments to the lowest interest first. So, if you were to take out a cash advance on a card that already had a balance, you'd have to pay the full balance before funds would be applied to the cash advance funds.
* Making cash advance interest effect from the day you borrow. Thats right folks, no grace period. Be careful about this!
Readers: If you have additional tricks of the trade that you'd like to help folks avoid, please leave us a comment.
Cheers,
Miel
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3 comments:
So true. I also blogged about the
credit card industry's practices after I read an article about it in the NY Times.
I also covered the Credit Cardholders' Bill of Rights which has been introduced to the Congress to stop (or at least limit) those practices.
These are all great reasons not to do business with these sharks. I don't get my hair by or get my car repaired by or buy appliances from people who treat me like crap, so why would I use a credit card? Is it really worth all the hassle it requires to keep checking up on your card issuer, making sure you're not getting screwed all the time?
it requires to keep checking up on your card issuer, making sure you're not getting screwed all the time?
Not really. Most of the "tricks" is only applicable to those who carry balances, which most here would agree is a really bad idea except for arbitrage.
All you really need to check is the monthly bill. The due date is printed on the bill - I hadn't even known about the date switches until I read it on this blog because I've always just looked at the date on the bill every time. Then I just switched to auto-pay. Any interest rate change or fees is on the bill as well and is pretty prominent. If you practice paying your bill in full you don't care about the interest rate; if you doing arbitrage, and you notice the rate change, you can call them - if it is a mistake they'll take care of it - or you can immediately send them the check for the full amount. Or take your business elsewhere.
If auto-pay is for the full balance, there is no need to worry about due date at all - they credit card will know when to take the money.
Cancelling auto-pay if additional payments are received.
This isn't exactly a dirty trick, but rather a way the program is setup to work for both those who set up autopay for full balance and auto-pay for minimum balance:
The program is probably treats both cases consistently: it enters either the full balance or minimum balance as "amount to be taken" database field. It them substracts all payments from this amount and takes the remainder from the customer's bank account. If it were doing it any other way, it could potentially overdraw the bank account. For example, the first few months after I setup auto-pay for full balance, I wasn't sure it took effect and somehow missed "to be deducted on" line in the bill. So I kept sending my checks. The policy of applying my payments before taking the remainder from my checking account worked well for me; without it I'd have less money on my checking and large negative balance on my card. With large amounts, there is a risk of overdraft. Since they cannot read minds of those who send them checks with auto-pay in place, they choose a safer way to avoid overdraft. After all, if you send them a check anyway, you could just include your minimum payment in it.
Some of the other things may indeed be bad or tricky, but for the most part easy to avoid.
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