You’re applying to a credit card, but there are so many options! This card offers one benefit, that card offers another. If you’re looking for a little help, take a look at these seven credit card secrets to help you through your selection:
1. Fixed Rates Aren’t Always Fixed
Credit card companies may increase your annual interest rate under certain circumstances. It’s not a big secret, but it can get lost in the fine print if you aren’t working with a trusted card issuer.
2. Late Payments and Penalties
Some companies may charge you two penalties for one late payment. Make sure that you understand all the potential missed-payment repercussions before you choose a card.
3. Double-Cycle Billing
Some companies may also impose double-cycle billing. This method not only takes into account your average daily balance of the current billing cycle, but also the average daily balance of the previous billing cycle. Be careful because this could potentially have a negative effect on your credit!
4. Shortened Grace Periods
Always check the fine print when it comes to the grace periods. A grace period is the period between the end of a billing cycle and the date your payment is due where you may not be charged interest. Some grace periods may extend up to 25 days, while others may be limited to as few as 20 days. Some providers may even do away with the grace period all together without telling you. Credit card companies are not required to give a grace period.
5. Spending Caps
Most credit cards have a spending cap, or credit limit, that the cardholder is assigned when they are approved. You might have heard of a “no limit” card and assumed that this means you have unlimited purchasing power with that card. Credit cards advertised as having “no limit” do not have a predefined limit. Instead, each cardholder’s spending limit is decided based on income, payment history and other financial factors. Because the limit can change month-by-month, you may not know your true spending cap.
Always check with your card issuer to ensure that you know what your monthly spending cap is.
6. Watch for Minimum Payments
Minimum payments can result in larger interest fees, especially with companies that change up their payment routine often. With smaller repayment requirements, cardholders are more prone to spending. This often means accruing more debt to pay off in interest to the provider.
7. Late Payments May Increase Your APR
One late payment may be all that the issuer needs to increase your annual percentage rate. Of course, this will make it more expensive to pay back your debt.
The key to making smart credit decisions is education. Be sure to contact the card issuers that you are looking into and get all the information you can about the card before you apply. While credit cards can be a great tool, they can also be dangerous if used incorrectly.