Credit Card Companies’ Tricks Of The Trade
Credit card companies and national lending institutions have been feeling a public backlash lately, as consumers experience higher interest rates and tighter loan restrictions at a time of corporate bailouts and massive bonuses. In truth, the credit card proposition has always titled in the companies’ favor. Now, with toxic balance sheets of their own, companies are moving more aggressively to limit their exposure and protect their assets. More than ever before, here are five things to remember about your credit card relationships.
First, pay all your bills on time, every time. Card companies can use even a one-time oversight as an excuse to dramatically increase your interest rate.
Read everything they send you. Companies notify you when they plan to change your APR or credit limit, but “routine” letters can get overlooked. Pay close attention to every letter, understand their implications and your rights, and be sure to review every aspect of your monthly statement for unanticipated changes.
Monitor your credit reports carefully. You’re entitled to free reports from all three major companies every 12 months. Understand your scores and watch for inaccuracies. These scores and related formulas play major roles in lending organizations’ verdicts on your interest rates, credit lines and ability to borrow money.
Understand how you’re billed. Many companies are moving away from the traditional average daily balance model that rewards people who pay off their balance each month, to a concept called two-cycle billing. In this approach, interest fees are assessed from the day an item is bought.
Think twice before using reward cards. In many cases, higher interest rates and annual fees offset the value incentives, such as "free" airline miles. Do a cost/benefit analysis and make sure it’s a product or service you’ll use frequently.