I am still have a Credit Card debt and it annoys me (see below for a bit more about my story). So I decided to write about all the ways that Credit cards are out TO SCREW YOU.
Soon I’ll write another part to this as I plan to transfer my balance to another card (detailing how to pick a good credit card).
My Story -I still have a Credit Card debt
In November I ended up with a huge amount on my credit cards (partly because I paid nearly $4k for a hair regrowth program see Christmas-spending-hangover for more detail). While I’ve experienced some hair growth – I’ve experienced some credit card interest as well!
I have been able to use some tips I wrote about to help reduce my credit card debt.
Ways that All Credit Cards will screw you (if you let them)
Trick #1 – Interest Free Days don’t count when you don’t pay your balance on time
The 55 interest free days that you get on purchases – are only when you pay your total balance on time. If you are $1 over or a day late – then you will have interest charged on the balance (perhaps for the month). Also next months’ purchases will be charged interest until you pay the total balance.
Trick #2 -One day late makes all the difference
Late payment (or payment less than the required amount) means: Interest will be charged on current purchases (and ALL NEW PURCHASES). Also interest accrues daily (by the way you want interest in a bank account to accrue as often as possible and interest on debt to accrue least often).
Unfortunately (and this is a rookie error on my behalf) I got paid on the weekend and I make the payment on Monday night, which, as it turns out is the due date. Paying one day late means I will probably get charged interest AND (perhaps more importantly) all of next months’ purchases will accrue interest from day 1–I hate credit cards.
Trick #3 – Forget to pay the minimum payment
I have missed the minimum payment once or twice – I’ve received a $25 penalty.
Trick #4 – Making cash advances (taking cash out from your credit card rather than paying for purchases)
Cash advances commonly have interest charged on day 1. Also cash advances may be charged at a higher interest rate than purchases.
Ways that SOME Credit Cards will Screw You:
Terms and Conditions
Different credit cards will have different terms and conditions. Many of the details in the fine print may be different from what you would assume looking at the main offer – these details are what are going to screw you over.
Some tricks in terms and conditions:
Trick #5 Different Interest Rate for Balance Transfers
The balance transfer rate may be different to the purchases rate at the start.
Trick #6 Interest Rate on Balance Transfers Changes after intro period
You get the cheap rate for the first X months – but most cards will then put the rate at a high percent (say 20%). This is despite the card saying that purchases attract lower rate of say 12%.
Trick #7 Annual Fee waived in first year
They say ‘signup now for no annual fee’- but then it turns out that you will be charged X annual fee after the first year (see below for Citibank example).
Other Ways that Credit Cards will screw you
The Annual Fee
I don’t think that credit cards should charge an annual fee FULL STOP. Because even if you don’t pay credit card interest – the Credit Card company still makes money.
How? By charging merchants. This is perhaps one reason why credit cards are not accepted overseas as much as Australia. Don’t get me wrong – you go to a major service station overseas and they will let you use your credit card. But a lot of small stores were mainly cash.