If you think card tricks are the work of street magicians and clowns at children’s parties well then you’ve been fooled even before the trick started. Card trick grifters live right in your very own wallet ready to strike you when you least expect it. These are our credit cards.
As we discussed in our previous article, credit cards can be quite the convenience for you. They allow you to pay for things in a secure manner by avoiding carrying a large amount of cash, they let you transact online or over the phone and they are accepted worldwide thus minimizing the need to bring multiple kinds of currency. We also talked about how credit cards need to make their money back and earn from the business. The collection of fees and of interest on late payments is the biggest chunk of how credit card companies make money.
Now that we have a fair understanding of how credit card providers make their money it will help us be aware of how to prevent turning this convenience into a nightmare. It’s nothing personal, it’s purely business, but credit card companies only make a nice chunk of change when you make a mistake or if something unexpected happens that cause you to make your charge lapse beyond the interest-free period. The sad fact too is that your card company also employs some tricks to throw you off causing you to make that mistake that will cost you.
We’ve put together some of them in this list to make you aware of them and arm you with the means to avoid these tricks when they are flashing before your eyes.
Three Date Monte
Credit cards rely on a combination of late fees and interest for charges that were not paid off before that item’s closing date. One such trick they employ is giving a promotion to switch from a paper to a paperless billing system. This provides you an incentive to move to that system but
normally what they do is also change up your statement date. Being used to a paper billing system, you may not notice their email that informs you of such a change and when you make your normal payment it will be either late or would have already incurred interest or worse, both.
The best way to avoid this is to clearly read their terms when they migrate you to the paperless billing system. Then use their online portal to check on your closing statement date. Be extremely maniacal about this and check it every single day. This way you are also aware of charges on your card. Try utilizing their apps that monitor your statement to familiarize yourself with what is going on with your card.
Over-limit Switch and Bait
If you think your card gets declined for going slightly over the credit limit, think again. Providers slap you with an over-limit fee for going over that line of credit and it’s usually a significant one. The worst thing is this over-limit fee continues into the next statement if it goes unsettled. One other trick sleazy providers do is suddenly lowering your limit to the point that it goes below your outstanding balance.
The best way to overcome this trick is to always be aware of what your limit is and where your balance stands. Armed with this knowledge it’s always best practice to keep your balance at 60% of your limit, this takes unexpected expenses into consideration and protects you from such tricks. Keeping your outstanding balance a good distance away from your credit limit also helps increase your credit score rating as well.
Like the old 80s song croons, credit cards only allow you to pay once in a month and will not accept payments more than that. Others slap you with a fee for paying more than once in a month under the guise that this causes extra work on their end to apply such payment. The real reason why they do this is because they know it is easier to avoid accruing interest or amassing late fees if the payment portal is continuously open. Giving only one chance in a month allows an event to happen that will sap your budgeted payment and cause you to just opt to pay the minimum amount instead of the full balance.
One way to get around this trick, especially if you are paid weekly, is to use an enveloped budget system. Credit card payments should be set aside and considered as money that is already out of your disposable income or untouchable money. Adhering to a strict budget as seen in our other series of articles also help because these expenses should already have been taken care of.
There you have it, some of the sneakiest tricks the boardroom magician can try to pull on you to pull money out of your ear. The key to avoiding a personal credit card crisis is by knowing how it works and taking advantage of the system. Our next article on credit cards will talk about how to save money by using credit cards to your advantage.