Top Five Credit Card Secrets Finance Institutions Do Not Want You to Know

1. Interest Backdating

Nearly all card issuers charge interest from the date a charge is posted to your bank account if you don’t pay completely monthly. But, some charge interest from the date of purchase, days before they have even compensated the shop on your behalf!

SOLUTION: Find another card issuer, or at all times pay your bill in full by the outstanding date.

2. Double -Cycle Billing

Issuers which use this mode of calculating interest, charge two months worth of interest for the 1st month you failed to pay off your entire balance in full. This situation arises only when you change from paying completely to carrying a balance from month to month.

SOLUTION: Change issuers or at all times pay your balance completely.

3. The Entitlement To Setoff

If you have funds on deposit at your bank, and also have your credit card there, you may have signed a contract when you opened the deposit account which permits the bank to take those funds if you become delinquent on your credit card.

SOLUTION: Bank at different institutions, or steer clear of delinquencies.

4. Charges Are Negotiable

You may be spending up to $50 a year extra as a twelve-monthly fee on your credit card. You may also be subject to finance charges of over 18%.

SOLUTION: If you are a satisfactory customer, the bank may possibly be willing to reduce the annual fee, and lower the interest rate, you only have to ask! If not, you can switch issuers to a reduced- priced card.

5. Interest Rate Hikes Are Retroactive

Most card issuers offer a 25 day grace period in which to pay for new purchases without incurring costs. Some banking institutions have shortened the grace period to twenty days, but only for consumers who pay in full monthly.

How to Have a Credit Card and NEVER Pay Finance Charges!

I am a credit card hopper. I got this name because I have had more credit cards then you can imagine. I have never paid finance charges on any of them. How you may ask? That’s the easiest part. I started out just wanting to build credit. If you have ever tried to buy a car or buy a house or anything over the Internet, you know you can’t without credit or a credit card. You can’t even rent a car without a credit card. You need money and you need it fast so you look for a credit card that offer 0% finance charges for at least the first 6 months. If you look really hard you can even find them 0% for up to 12 or 15 months. The one I have even covers all purchases that I make with the card for up to the 12 months. Now that don’t cover cash advances. That is where the credit companies get past the 0% finance charges. If you take a cash advance then you will pay finance charges on the cash advance amount until the card is paid off, and that will be at a very high rate. Now if you don’t take a cash advance and just pay on the card, you need to make sure you are making large enough payments to have it paid off within the 6, 12 or 15 months. Also you need to make sure there isn’t a yearly fee on the card. There are more cards out there with no annual fee then there are with annual fees. If the one you are looking at has an annual or yearly fee stay away from it.

If you see that there isn’t anyway you can pay off your card within your 0% finance charge time limit, then you start looking for a new 0% card right away. By the time your 6 months are up or what ever the time limit is on the card you have, you should be able to have another card ready to HOP to at 0%. This is what I call “Credit Card Hopping”. Most credit cards offer 0% on balance transfers. So as soon as you have found a new card you can call them and apply on the phone for it and do the Balance Transfer on the phone. Just make sure if you have a payment due on your old card you check with them and make sure it has been paid off by the other company so you’re not late on you’re payment because it normally takes about 3 to 4 weeks for a transfer to go through. As soon as you know it is paid off you just start the whole process again.

Just keep in mind the credit card companies want your business more then you need them. They want your business because they know if you take their card for 0% there is a big chance that when your time limit is up they will make money from you on you remaining balance.

How Are Finance Charges Calculated?

Whether you are shopping for a new credit card or wondering about the one that you may already have, knowing how to calculate the finance charge applied to that card is important. First, however, it is equally important to know what finance charges really are.

A credit card finance charge is the amount of money that you pay to the credit card company in order to use their credit. This is not the same as the purchase amount balance. The purchase amount balance is the dollar amount of the purchases that you made using the card. If you pay off the purchase amount balance within the stated amount of time that the company allows, you will have no finance charges applied to the amount. It is when you carry over your balance that finance charges are triggered and added to your account.

Finance charges are calculated using the amount of your outstanding balance and APR. The APR is the Annual Percentage Rate and all credit cards use them to figure finance charges. It is important for consumers to understand that the ARP can vary from one company to the next, and it can even vary within the same company. It is for this reason that consumers should always look for the companies with the lowest APR’s. This will save you money in the long run.

There are several ways that credit card companies can calculate the finance charges that they apply to consumer credit. Many people do not realize it but the method that is used can make a difference in the amount of money that you will have to pay. Here are some of the methods that credit card companies use to figure finance charges on your outstanding balance:

They can calculate using one billing cycle or two billing cycles.

They can use the adjusted balance, previous balance, or the average daily balance.

They can exclude or include new purchases in the balance.

You will normally find that you have a lower finance charge when the company uses what is known as one-cycle billing and uses the average daily balance method which excludes new purchases. Much of this, however, depends on the balance and the time of the month that you make purchases and payments.

The next lower finance charge method is the adjusted balance, followed by the previous balance method. You can see which method the company is using by reading the bill that you receive. This information is usually contained on the back side.

It is also important that you understand that some companies will have a minimum finance charge system. When a credit card company uses this system you will be charged that set amount even if your calculated finance charge is less than that amount.

Of particular importance to some credit card holders are the cash advance programs that come with some cards. Consumers should be very careful when using credit cards for cash advances. Many companies that offer cash advances treat those advances differently than they do purchases. Before you use your credit card for a cash advance, make sure you look for the details of how you will be charged for that advance.

You will certainly want to know what the APR is for cash advances. Keep in mind that this may be significantly higher than the APR that is used for purchases. You should also investigate the fees that may be applied to the transaction. Fees are in addition to the finance charge that you will have to pay.

Lastly, find out how your payments will be credited. Some companies will apply your payments to your purchases first and then to any advances in cash that you have taken.

Use your credit card wisely and keep track of your finance charges and you will enjoy your credit more fully and avoid some of the pitfalls that many consumers experience.

Defining Credit Card Finance Charges

There are other fees associated with the use of a credit card besides the actual charge from each purchase. These other costs can add to the total balance on your account that you have to pay. The common credit card fees you will encounter at some point are the annual fee, the APR, late payment fees and the finance charge. The finance fee is added to it every month while the others are less frequent.

The credit card finance charge will be the dollar amount that you have to pay to the credit card provider for the use of their lines of credit to make purchases. This finance charge will be different depending on the APR or annul Percentage rate of the card. This is how credit card finance charges affect you card balance.

Your individual credit card company will have its own policies and approach to calculate the finance charge for your card. The outstanding balance will determine how much you will end up paying in credit card finance charges each year more than the APR will affect it. You need to understand how your outstanding balance is calculated.

The outstanding balance on your credit card may be calculated during one billing cycle or within two billing cycles. You must note that there are three types of balances which are used to figure the amount of your annual finance charges. These balances are the adjusted balance, the average daily balance, and the previous balance. Each of these balances has something in common, in that you will need to decide if new or recent purchases will be counted as part of the relative balance. When you have done this, you can then calculate the credit card finance charge. The finance charges will vary depending upon the billing cycle based on the carry- over balance and the timing of different purchases and payments.

Many of the credit card companies provide credit cards that operate under what they call a minimum finance charge policy. With this type of finance charge the cardholder is given a flat rate for the finance charges each year. This will mean that the rate will not vary or fluctuate because of differences in the card’s balance each billing cycle. Your minimum finance charge is activated when your card has a carry-over balance that goes into the following credit card billing cycle.

There is no way to avoid the credit card finance charge. It is a necessary cost which must be paid in order to continue using the convenience of the credit line to make purchases. This means that it is important to have a good idea of how they work with your particular credit card company. You should have a working knowledge of what affects the charges that are added to your balance that you will have to pay. What would you do if you are assessed a wrong amount and then pay for something that is not applicable? You must spend some time studying your credit card terms and uses in order to know what to watch for.

Credit Card Debt – Monthly Payments and Finance Charges

Some Australian cards require cardholders to pay off credit card debt in its entirety each month. As benefits, they normally do not charge finance fees and at times, no maximum limit. Most cards being offered today are known as revolving credit. This means cardholders are allowed t carry a balance.

Any outstanding card debt will earn interest that cardholders must pay. In addition, you are given a minimum amount to pay credit card debt. Often, the minimum amount of payment is 5% of your current balance.

Knowing how finance charges are being calculated by card companies is important. This gives you a better idea how your credit is being computed. The following are the three methods used by card companies to determine an individual’s finance charges:

Adjusted Balance

This method is widely believed to favour the cardholders. This method takes the balance from your previous statements, adds new fees, subtract the payment you made and then it is multiplied by the monthly interest rate.

Average Daily Balance

This is the most commonly used system by many card companies. First, your card company tracks your balance each day. They add charges and subtract payments as they occur. At the end of the period, they will calculate the average totals of these and then multiple the number by the monthly interest rate to determine finance charges.

Previous Balance

Note that this method is believed to favour the card company and not the cardholder. The card company will multiply your previous statement’s balance by the monthly interest rate. This means that cardholders will still be charged interest on their balance a whole period after they pay off credit card debt.

The bottom line is, the amount that a person will pay will depend on the balance, the interest rate that applies and the way additional fees are calculated by his/her respective card companies.