Avoiding Credit Card Secret Traps
Credit card secret traps are the hidden side of plastic that
keeps you in debt that is difficult to pay off. The main
objective of credit card companies is for you to carry the
largest balance you can possibly repay.
Trying to avoid these credit card secret traps is tricky
because credit card companies constantly raise your credit
limit, and offer you perks to get you to charge even more.
Credit card companies can get very creative with fees and
interest rates and that's where you can get into financial
trouble. To avoid this from happening here are some common
credit card secret traps to be aware of when you compare credit
card company terms.
Two Cycle Billing
The two cycle balance method is where the interest on your
average daily balance is computed using both your purchases from
that billing cycle and charges from the month before.
Even if you paid off your entire balance from the month before,
that figure is still used along with your current month
purchases to calculate your average daily balance. This credit
card secret trap can keep you in deep debt for decades.
Credit Card Grace Period
A credit card grace period is the number of days before the
credit card company starts charging you interest on new
purchases. Most cards have a grace period but beware of the
cards that don't.
If you have a card with no grace period, you always pay
interest on new purchases from the day you make the purchase,
even if you pay your bill in full.
Cash Advances
You almost never get a grace period for cash advances, which
means you begin paying interest on that advance right away.
Also, the interest rates on cash advances are typically higher
than the ordinary rate on card purchases. A cash advance is
costly and one of the most common credit card secret traps.
Credit Card Late Fees
Credit card companies can impose hefty penalties on any balance
that you pay late or balances that exceed your limit. But the
penalties of credit card late fees don't end there.
If you violate even one of your credit cards terms, other
credit card companies may also punish you with penalty rates
even if you have never missed payments on them.
Interest Rate Changes
Credit card companies are allowed to change your interest rate
anytime, provided they give you 15 days notice. So read what
your credit card company mails you because some companies will
sneak this by hoping you won't catch it.
The bottom line is read the small print in the credit card
terms provided by the card issuer regarding the credit card
company rules concerning the billing method, grace period as
well as the interest rates and fees.
Also, think about how you will use the card, especially if you
expect to carry a balance. Then, compare credit card company
terms and try to choose the card that keeps you from falling
into these credit card secret traps.
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