Most of us are walking around with a credit card in our wallets, our phones, and saved on our computers. Maybe you even have multiple credit cards – a business AmEx, a card to raise your limit, a card that has great travel perks...
So, it makes sense that the credit card industry is booming. In fact, in 2022 alone, U.S. credit card companies made $130 billion off of consumers.
With credit cards being such a powerful industry, there are some things you need to know to make sure you’re using your credit card wisely and aren’t being taken advantage of.
6 Things Credit Card Companies Don’t Want You to Know
1) Your “fixed rate” isn’t set in stone
“Fixed rate” sounds deceptively solid. Essentially, what it means is that the APR (or interest rate) on your credit card won’t change due to inflation or the prime index.
But that doesn’t mean that your interest rate won’t change based on other factors, for example, if you have a history of missed payments or if your credit score took a hit.
2) The “45 day notice” is misleading
If your APR is going up, then the credit card company is required to send you a 45 day notice. However, that doesn’t mean that you have 45 days until the new APR kicks in; it only means that you have 45 days to pay the extra interest accrued at a higher interest rate.
In actuality, on the 15th day after the postmarked date, your account starts accruing interest at the new higher interest rate on new purchases.
3)They profit from your loss
Credit card companies are not on your side. When you don’t pay your credit card balance in full every month, they charge you interest on that money.
Remember when I said U.S. credit card companies made $130 billion off of consumers in 2022? Well, $105 billion of that came from interest alone.
Not shocking, considering the fact that the interest rates on credit cards are notoriously high. Right now, the average credit card interest rate is 24%.
Because of that, credit card companies have no motivation to help you stay out of debt. In fact, the longer you stay in debt, the more money they make. And at the end of the day, credit card companies are businesses. Their primary goal is to make money.
4) They’re (sometimes) willing to negotiate
That said, credit card companies can be willing to negotiate, especially if you have a good track record.
You can ask for a lower APR, change your due date so it works better with your cash flow, and even request that a late payment be removed from your issuer’s report to the credit bureaus.
5) They like to sneak in fees
There are several types of fees that credit card companies like to include:
- Annual fees: Many credit cards don’t require an annual fee. However, companies often charge these on cards that come with significant sign-up bonuses or user perks, like cash-back and miles.
- Balance transfer fees: A balance transfer is when you transfer the balance of one credit card to another card, usually to get a lower interest rate. When you transfer the money, you often pay a balance transfer fee.
- Late payment fees: When you don’t pay your credit card bill by the due date (or at least the minimum payment), you’ll usually be hit with a late fee. In 2022, the average fee for late payments was roughly $32, and U.S. consumers paid a total of $14.5 billion in late payment fees.
- Foreign transaction fees: Foreign transaction fees may be charged on transactions made in a foreign currency or through a foreign bank. This fee is meant to cover the costs associated with currency conversion and processing payments through global networks. If you love to travel, it may be worth looking for a credit card that doesn’t charge foreign transaction fees.
Now, fees aren’t always a negative thing. There are credit cards that require fees but they end up paying you back the fee – sometimes even more – in other perks, like cashback programs or travel points.
So, having a fee isn’t necessarily a reason to steer clear of a certain credit card, but you do need to read the fine print, be aware of any fees, and assess whether the benefits are worth the price.
6) They charge merchant processing fees
In addition to user fees, credit card companies collect money from the merchant or retailer who accepts credit cards. These fees cover the cost of the transaction.
Ordinarily, this isn’t really a factor for consumers; large companies build the cost into their pricing.
But some small businesses charge extra for using a credit card to help them cover the costs or require you spend a minimum amount to use a credit card. So, if you’re going somewhere – maybe a farmer’s market or local shops – where you know you’ll be buying from small businesses, you might want to carry cash.
Final Thoughts
Credit cards aren’t the bogeyman of finance, like they’re sometimes portrayed to be. But it is important to stay aware of things that credit card companies are hiding from you so you don’t make financially damaging mistakes.
Like I mentioned before, if you want to learn more about how to manage your money using our proven, feel-good system, check out our free masterclass! Our Dow Janes co-founder Laurie-Anne will explain how she used this system to go from $40,000 in debt to making thousands from her investments every month!
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