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Things You Should Know

When you apply for a creditcard online, there are several things that are helpful to know. In this credit card debt article we'll give you information on how to get the best credit card rate and how to do a credit card balance transfer.

The Secrets Behind Credit Card Companies

Interest Rates Can Be Raised Even If You Pay On Time

As a credit card user, there are several things you should know about companies issuing creditcards . Number one is that even if you make your credit card payments on time each month, the credit card companies can raise your interest rate automatically if you’re late on payments elsewhere. This means that if you are late on another credit card payment, or the phone bill, the home loan, or simply because the bank thinks you have taken on too much debt, they can raise your interest rates. This is known as the “universal default” clause and is becoming a standard clause in credit card agreements. Banks think that if you are neglecting bills elsewhere they don’t want to risk not getting paid either.

Which Are You?

Here's the credit card industry's jargon for its customer categories:

"Revolvers" roll credit card balances over month to month, never paying in full.

"Deadbeats" pay their balances off in full every month.

"Rate Surfers" or "Gamers" shift usage between credit cards based upon interest rates.

The Lowdown on Late Fees

There is no limit on the amount a credit card company can charge a cardholder for being late on a payment, even if it’s an hour late. Before 1996, late fees ran $5 or $10. Then in 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted the existing restrictions on late penalty fees, causing them to soar, reaching upwards of $30. Credit card companies have almost doubled their revenue from charges for late fees, over-the-limit fees, and fees for returned checks. It is possible these penalty fees could rise as high as $50.

Read the Fine Print

Always read the fine print on your credit card agreement. Tucked into the fine print that people so often ignore are provisions that can add up to hefty fees, penalties and rising interest rates. Below are some of the important sections of a typical contract

  • Spending Limit – The credit line may be increased, reduced, or canceled at any time.

  • Authorizing Charges – The card may be rejected at any time due to:

    • the account is in default,
    • the company suspects fraud

  • Applying Payments – If there is more than one interest rate on the account, payments will go toward paying off the balance with the lowest rate first. Interest continues compounding on the balance with the higher rate.

  • Default Rates – This includes the “universal default”, in that, if you are late on any other payment (phone and utility bills, car payment, home loan) you are subject to higher interest rates, even if your credit card payment is made on time.

  • Grace Period – If the balance is zero at the start of the billing period, the cardholder does not have to pay finance charges on purchases if the balance is paid in full again by the next due date. If not, interest accrues from the time of purchase.

  • If your credit card (or the number) is stolen and used by the thief, you are only obligated to pay the card issuer $50 maximum.

  • Fees – In addition to an annual fee you may also be charged for:

    • late payment
    • bounced or unsigned check
    • copy of statement
    • payment by phone

  • Right to Sue – Any dispute between the cardholder and the issuer may be resolved only by binding arbitration, meaning you cannot sue the credit card company.

  • Terms of Agreement – May be changed at any time for any reason. The cardholder will be notified by mail only 15 days beforehand. The charges will affect the current balance. Use of the card constitutes acceptance of the new terms.

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