Credit card companies areslick operators. The followingare 7 things that you'll neverhear from your credit card company,and some helpful solutions:
1. Applying for a lot of differentcredit cards may injure yourcredit rating.—Many companieswon't quote you a rate until you actuallyapply for a card, so they may beable to charge you more if you're abad credit risk—tricky business.
Forget filling out allthose "preapproved" applications.Do your homework and check outthe deals. Carry only 3 or 4 cards.
2.We want you to pay as littleas possible each month.—Over thepast 5 years, some companies havequietly lowered the typical minimumpayment from 4% to 2% of your balance.If you pay just 2% on a $1900balance at 18%, it will take 23 yearsto pay off the balance and you'll paymore than $4000 in interest.
Pay more than the minimumevery month and save ininterest. Pay as much as you canpossibly afford.
3. Our credit card may nothave any grace period.—Mostcredit cards give you 25 days beforecharging you interest if you're notcarrying any unpaid balance; somegive you 30 days. But others havecut back to 20 or 15 days. A fewhave none at all, charging you interestall the time on anything that youbuy. On most cards, there is nograce period for cash advances ornew purchases if you're carrying abalance from the previous month.
Check the small printand choose the longest grace periodthat you can find, typically 25 days.
4. Late-payment fees aren'tour only fees.—Beware of fees forclosing your account, inactivity feesfor failing to use a card for a period oftime, fees for not carrying a balance,over-limit fees, and transaction feeseach time you use your card.
Don't sign on with acard until you have a list in writing ofall fees that the company charges.
5. We'd love you to try our"skip-a-payment" plan.—Creditcard issuers have 2 tricks up theirsleeve to jack up the interest you owe.The first trick usually comes aroundthe holidays. The credit card companysends you a warm and fuzzy letteroffering to let you skip making yournext payment. Aw, isn't that nice ofthem? But they're not letting you skipa payment because they like you.What they bury in that letter is thatyou'll still owe interest on the moneywhile you skip a payment.
Say thanks, but nothanks to this generous offer.
6. Our convenience checksaren't a great deal.—For starters,the interest rate on these checks maynot be the same as with your creditcard—it's probably higher. Also,there are transaction fees. Mostcards charge a fee of 2% to 3% of theamount you write the check for.Also, most have no grace period, sothe interest on a convenience checkstarts piling up as soon as you writeit. Ditto the above when using yourcredit card to take a cash advance.
If you get conveniencechecks in the mail, rip them up.Then call the issuer and tell them tostop sending them. These checksleave you vulnerable to identitytheft. The checks on your accountcould end up in the wrong mailbox—and in the wrong hands.
7. You can haggle for a lowerinterest rate.—Credit card companiesspend big bucks to find newcustomers, so good clients haveconsiderable leverage.If you're in good standing,call your issuer and negotiate fora lower interest rate and waiver of theannual fee. If you've been paying billson a credit card with a 19% or 20%interest rate, tell the issuer, "I want alower rate or I'm splitting." You canalways transfer the balance to a cardwith a lower interest rate and cut upthe card with higher rates. There are6% interest rate credit cards, and ifyour credit is good, you should beable to get such a rate.
Ken and Daria Dolanare the
hosts of The Dolans, the nation's
#1-rated personal fi-
nance show, which originates
from WOR-AM in New York.
For 4 years, they served as
money editors on CBS This Morning and CBS
News Saturday Morning. They also previously
hosted their own popular personal finance
show on CNBC and have appeared on many
other television shows, including The Today
Show. This article was adapted from Don't
Mess with My Money, by Ken and Daria
Dolan, copyright 2003. Reprinted with permission
from Currency/Doubleday Books.