Avoiding Credit Card Traps Helps Your Credit Score |
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Per reports, an average American household
carries more than $1,000 in credit card debts. And the credit card
companies are making billions just out of the interest paid by the consumers. What's more, in several cases the credit card companies are overcharging with the consumers being unaware about it. With more credit card holders and credit card companies trying to reap maximum profits, consumers end up paying more without even realizing it. Credit card companies employ different methods to increase profits, such as hiking fees, reducing grace periods, and putting forth regulations that make consumers pay more interests. By now you must be wondering how you can avoid paying more than you should. Simple! Just save yourself from these six credit card traps. Trap number one is making late payments. By paying your bill late, you are charged with a late fee and interest on the previous month's balance. The amount charged as late fee has grown over the past few years. At same time, the credit card companies have reduced the time period between the dispatch of your bill and your due date, because late payments mean more profit for them. Many of the companies have even done away with the leniency period that was meant to cover delays in payments due to the postal delays. The second trap is in the form of hidden transaction fee. If you avail a cash advance or a balance transfer, you'll be levied a transaction fee that may be to 2-3% of the amount you're transferring. If you purchase lottery tickets with your credit card, chances are that it might be considered a cash advance and not a retail purchase. The third trap is the interest rate you need to pay when you miss a payment or make a late payment. This also leads to a high APR, which remains high until you start paying regularly again. The fourth trap is the reduction in grace period. Earlier, consumers were given one month's time to pay their bill. That time period has now come down to 23 days. And there are some credit card companies who have completely done away with the grace periods, which means that the consumer pays interest from the date of the charge. The fifth trap is termed bait and switch. In this trap, you receive credit card offers in the mail. The features are too tempting to resist - low interest, 25-day grace period, and many other features. But once you have applied for the credit card, and don't qualify for it, the credit card company may issue you a lower grade, non-premium card that will obviously cost more. The sixth trap is low minimum payments on your bill. Over the past few years, credit card companies have reduced minimum payments from 5% to a current standard of 2% to 3%. This has been designed to make it appear lucrative to consumers, but it increases the amount of money they pay as finance charges as the time required to pay back the balance increases drastically. Therefore, take your time to carefully read and understand your credit card agreement. This little effort will go a long way in helping you save money by cutting out unnecessary penalties, fees or growing interest rates later. |
