The credit card industry can be tricky and the lack of financial literacy can create a financial nightmare. There’s tons of great information out there that you can research, but there’s always the “fine print” details that most consumers overlook. How many of these were you aware of?
1) We all know that getting a cash advance on a credit card is a dangerous route. Cash advances are treated differently than your standard purchases. These often come with unusually high interest rates, sometimes as high as 29.99%. However, did you know that your payments are applied to your standard purchases first? This means that the balance you’re carrying on your cash advance will always accrue the 29.99% interest charge until you pay off your standard purchases first. So if you’re still accumulating a balance on your credit card, you’ll ultimately never be able to pay off your cash advance balance.
2) Have you heard of the universal default clause on your cardholder agreement? The universal default allows credit card companies to increase your interest rates from your original agreement at any given time if you’ve defaulted on other accounts. It doesn’t matter if you’ve been their best customer for years. Credit card companies run soft credit reports on you every month so they have an idea of how you’re keeping up with other accounts. If they see that you defaulted on a mortgage, auto loan, or another credit card, they may assess you as a possible high risk consumer.
3) Did you know that you can ask for a different due dates? If you’re juggling multiple credit cards, it can be easy to lose track of all the different due dates. And of course, this is why we always recommend setting up payment reminders. All it takes is a simple phone call.
4) Have you ever looked at the return address on your credit card statement? Chances are that it’s based in South Dakota or Delaware. That’s because these two states have weak “usury laws” which means that there is no cap on the interest rate they can charge. See below for a list of states where your creditors are mostly located.
5) Are you paying your bills on time? You’re considered a deadbeat. Yes, a deadbeat. The credit card industry refers to people who carry a balance as a “revolver” and people who pay off their balance in full as “deadbeats.” This is because credit card companies tend to make very little money off financially responsible consumers.
The important lesson to be learned is to always be a deadbeat! Avoid cash advances and always make sure you’re paying every single one of your bills on time. Late payments can get you trapped into a never ending spiral of debt.