When money is tight, many people use credit to pay for basic necessities. But the problem arises when credit card debt becomes more than people can afford.
Roughly 29 percent of Americans have more debt than money in their savings. With the cost of living going up, the debt problem is only getting worse.
Did you know that there are secret tricks you can use to stay informed and manage your credit card debt? We go over some of the biggest credit card secrets they don’t want you to know.
1. Fixed Rates Don’t Stay Fixed
Fixed interest rates normally stay the same throughout the year. But that doesn’t mean your fixed APR will never change.
Issuers may raise your fixed-rate APR if they choose. However, thanks to the Credit CARD Act of 2009, cardholders gained some protection. Now a notice of a potential increase must go out 15 days beforehand.
2. Paying Only the Minimum Adds Years of Debt
Credit card statements now come with a Minimum Payment Warning. It warns cardholders that only making the minimum payment results in more interest paid and a longer payoff period.
You could be adding years to your payment plan unless you pay more than the minimum on your bill.
3. Late Payments May Increase Interest Rates
If you can’t make your minimum payment, you face late payment fees. You may also face an increased interest rate. Depending on your credit card, your APR may skyrocket as high as 29.99 percent.
So is there a maximum credit card interest rate allowable by law?
Even 79.9 percent is legal as long as the issuer discloses the terms laid out by the Truth in Lending Act.
4. Late Payments Affect Your Credit Line
Not only are late payments expensive, but they also impact your APR on other cards. The Universal Default Clause protects creditors against anyone that might pose a risk. So if you miss a payment, expect to see higher interest rates in your future.
While there are credit options for bad credit, you should always avoid missing payments.
5. Some States Don’t Have an Interest Cap
Some states don’t have usury laws and have no interest cap. This means there are weak or no regulations on the amount a company can charge for interest.
Similarly some installment loans can come with very high interest rates.
If you have a variable-rate card, call the company and see if you can switch to a fixed rate or a capped rate instead.
6. Grace Periods Are Disappearing
Interest-free or grace periods allow people to pay off a debt in a certain time frame without any interest. Grace periods may range from 20 days to several months, depending on the credit card.
However, cards that offer interest-free periods are disappearing. If you don’t pay off your debt during that period, it may take months to reinstate the grace period. Worse still, it may not be reinstated at all.
7. You Can Negotiate Your APR
Even with a solid credit card payment schedule, your debt may be too much to handle. High-interest rates and annual fees add up and can leave people swimming in debt.
Credit card companies rely on people with debt only paying the minimum. But what they don’t want you to know is that you can negotiate and get a better deal. The first step to doing this is knowing how APR works.
Take Advantage of These Credit Card Secrets
Credit cards used to be confusing and full of hidden fees. Thanks to the Credit CARD Act, cardholders are more protected than ever but it’s still up to you to stay informed.
Check out our list of the best credit cards and use these credit card secrets to find the perfect card for your needs. Here are some other articles you might find interesting: