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Credit Card Secrets You’ve Never Known—But Should

Jan. 29, 2014
Credit Card Basics, Credit Cards
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Loopholes, fallacies, and fees—Oh my! You may think you know your way around the credit cards you use, but there is always more to know. Credit card secrets, unlike Da Vinci Codes or secret menus, can have far-reaching consequences on your life. Knowing these tricks of the trade can save your credit score, redeem you from a higher interest rate, or otherwise help you save money. So let’s bring them to the light of day.

1. What the grace period really means

Let’s say you charge a $900 laptop to your card, pay off $100 before the due date, and then pay the rest off two days after the due date. You won’t be charged interest for just two days—the interest can go back to the date of the purchase. Put simply, a grace period waives the interest on your purchase as long as you pay your bill in full within its time frame. That time frame used to be a month but these days they’re shrinking to 25 days or less. So remember: You pay on time, you have that grace period. You pay late, it’s like it was never there.

» MORE: How to read your credit card statement

2. The “fixed” interest fallacy

You joined on a card with a fixed interest rate, and you would assume that it will stay a “fixed” rate. Nope, that may not the case. You’ll get a fixed rate across all charges to your card for the specified period of time stated in the terms, but the issuer can decide to increase the rate after such a period. You may, in fact, have an introductory rate for six months or the first year. In any case, the news of the increase usually will arise in the form of a thin, white envelope in the mail.

3. The rate increase loophole

According to the Credit CARD Protection Act of 2009, the credit card company must notify you of a change to your interest rate 45 days before the rate increase occurs. But read that carefully. You can still be charged starting the 15th day upon being notified of the rate increase—because you won’t be billed until the 45-day marker has passed. This loophole gives you less time to prepare for the change than you think.

4. The illusion of “no limit” cards

Charging $6,000 onto a no-limit credit card may sound fine—until you realize that there is a monthly balance limit of $5,000 on your account. No limit cards are really “no preset limit” cards, meaning the limit is based on your own spending habits.

5. Late once, pay twice

You’re late. The due date has passed, and as you can expect, you have to pay a one-time late fee, $35 typically. But what happens if you’re 60 days late? Unfortunately, things get worse. You’re now in the second billing cycle since the charge and a penalty rate may now be put on your card. This means you’ll be paying a higher interest rate on your existing balance and on new charges. The rate? Many big banks have it at 29.99% APR. Ouch.

There is a way out of the rabbit hole of debt, though. If you pay your minimums on time and in full for six consecutive months, the creditor must allow you to return to the original interest rate.

6. Your bargaining power

Onto the more positive secrets, you can argue to keep your interest rate what it is. Credit cards are a competitive market and your issuer doesn’t want to lose you all of a sudden. That said, even if you end up losing and the rate increases, you can close your card. What the credit card company can’t do is demand payment in full on short notice—the CARD Act protects you and allows you to maintain a payment plan of up to 5 years at the original rate.

7. You can avoid the impact of late payments on your credit score

Credit reporting agencies cannot report a late payment until it has been a full 30 days past the due date of a charge, as per the credit reporting bureau guidelines. Even if the issuer punishes you with a late fee, you can save your credit report if you pay the full bill within those 30 days.

8. You can dispute mistakes

Under the Fair Credit Billing Act (FCBA), you have the right to seek a refund or have a statement corrected for any charge of $50 made within 100 miles of you that has a billing error. These can include the following: never receiving your package, having incorrect details on the charge, or receiving goods for which you didn’t ask. You must try to contact the seller first, but if that fails, the credit card company can step in. Or you can even file an appeal with the Consumer Financial Protection Bureau too.

9. You can quicken payment processing

If you find yourself cutting it close with a bill’s due date, go directly to your bank branch and pay the credit card bill there. This will ensure that the payment is credited the same day. The same goes for retail credit cards at their stores.

Final word

Take these secrets with you on your quest to better credit and beyond. Battling against a wrongful charge or a higher interest rate doesn’t have to be intimating when you know your rights and the credit card company’s limits.

Credit cards with lock image via Shutterstock