Managing Your Credit Card
How can I get a lower interest rate or APR on my current card?
If you feel that your credit is being handled responsibly but that you feel that your interest rate that you're paying is too high, then call your credit card issuer and say "I want a lower rate." Often you will get that lower rate. If there's resistance, ask to speak to a supervisor and the supervisor may have authority to give you a lower rate. If that still doesn't do it, try to inform them that you were offered the opportunity to have another credit card with this lower rate, and you may find that they will match what you could get from a competitor because they don't want to lose your business. So, even an individual consumer, one individual consumer, can have the negotiating clout with a large financial institution if they have the willingness to negotiate.
What is a "balance transfer" and are there costs associated with it?
When individuals have built up balances on their credit cards and they have a substantial amount of money that they have to pay, they can be enticed to transfer the balance to a lower interest card. This can be a good technique if the lower rate card is either a permanently lower interest rate, or even if it's a come on interest rate in the beginning, if the interest rate as it adjusts will adjust back to a normal market interest rate as opposed to an extraordinarily high rate. It's also possible to abuse these situations because once you have a new credit card and you've transferred the balance from your old credit card, you still have the line of credit on your old credit card, and you might be enticed to charge more than you should, and you might even get to a point where you might charge more than you're even able to responsibly handle.
What is a "finance charge"?
A finance charge on a credit card is the equivalent of interest. It's stated as a percentage rate, but the APR will also be disclosed, which would be the true cost of the interest.
What is a "cash advance"?
Many credit cards provide the holder with the opportunity to borrow from the line of credit that's available to them and to take a loan. It's important that the credit card holder understand that the interest rate that's going to be charged may be different, possibly higher, than it would be on ordinary purchases, and there may be a transaction cost associated with the loan as well.
Should I use the "checks" that my credit card company sends me?
The credit card companies are very good at trying to entice you to utilize the credit that's available, because they make money on the interest that you pay to them. One of the techniques that credit card companies use is to give you checks that you can write to make a purchase, or just to cash the check to put cash in your pocket. What a consumer has to understand is once that check is written, it's the equivalent of a cash advance, and it will be a loan that you're taking on your credit line. There will be interest that's charged, and there may be a transaction charge for writing that check, as well.
What does it mean to "carry a balance"?
Carrying a balance on a credit card means that you're not paying the obligation in full, that you're paying a lesser amount. Every credit card has a minimum required payment which may be very, very small. If an individual only pays the minimum credit card charges, they may never get out from the cycle of living off of credit card debt.
Should I carry a balance on my credit card?
Generally speaking, I advise people not to do so. Nevertheless, the responsible use of credit and the availability of credit may require you on occasion to not pay things in full. An emergency may happen, something unexpected. You may need a new engine for your car and you just don't have enough money in your checking account to do it or you can't pay it off all at once. Alternatively you may have to take an unexpected trip because there's a family problem and having the ability to charge an amount that is more than you ordinarily would and more than you can even pay off over a one month period may still make sense, as long as you handle it responsibly and pay it off over a period, a several-month period of time.
What if I pay my credit card bill late?
If you pay your credit card bill late, there are a number of consequences. The first is, there will be a late charge and that late charge can be anything from a few dollars up to perhaps 29 or 39 dollars. In addition, there'll be reporting to the credit bureaus who keep track of how individuals are handling their credit. And lastly, the credit card company may have the right, and therefore may increase the interest rate that you are being charged from a lower more favorable rate to a higher rate, because you are now deemed to be more of a credit risk.
What is a "debit card"?
A debit card is a relatively new innovation and financial tool which has arisen in recent years, and I'm seeing more of my clients utilize the debit card. The debit card may look very much like a credit card, but it is not. It works like a credit card in that you can go to a vendor and instead of writing a check or handing them cash, you hand them the debit card. And you'll get a receipt when you use a debit card, just like you did with a credit card. However, immediately upon the debit card transaction hitting the vendor's computer, that amount is deducted from your checking account. So a debit card is an automated check-writing function.
What if my credit card is lost or stolen?
One of the disadvantages of having a credit card is that if you lose it, it's possible that somebody can utilise it. It's very important that if your credit card is lost or stolen, you notify the issuer as quickly as you possibly can. You, as a responsible creditor, have to notify the issuing company as soon as you reasonably can.
How often should I review my credit card statements?
I think it's really important that individuals examine their credit card bill when it comes in, and there are several reasons for it. First of all, it's possible that somebody may have gotten your credit card information, and with identity theft being as rampant as it is, they might have been able to purchase something utilizing your credit card. Or, you may have had a dispute with a vendor and returned the merchandise, but the vendor may not have properly credited your account.
What is a "predatory lender"?
Predatory lenders can even take the form of credit card issuer. They typically offer very low come-one rates because they know that individuals who are carrying balances are going to be enticed to transfer their balances to these lower balance credit cards. The credit card holder has to understand that many times there's a charge for transferring the balance. I have seen charges of as much as four percent of the amount being transferred, so if somebody is going to transfer a $1,000 balance from one credit card to the next, there could be a forty dollar charge just to transfer the balance. If you don't handle your credit responsibly, and pay late even once, then these predatory lenders can jack up your interest rate to not only the same amount as you might have been paying on your old credit card, but substantially more.
If I'm having a dispute with a company, must I pay their charge on my account?
The credit card company will give you a temporary credit during the time that there's a dispute, and they will investigate the credit. I have always found that, once the credit card company is involved with the dispute and tries to resolve it, that the dispute will ultimately be resolved. Either the vendor will handle the dispute in a responsible way, or if it wasn't your charge, they will be able to determine that that's the case.
