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5 Secrets that Credit Card Companies Won’t Tell You Up Front

5 Secrets that Credit Card Companies Won’t Tell You Up Front

While there are a lot of terms and conditions that are buried in the fine print of credit card agreements, most people only pay attention to the big numbers in the summary box: the interest rate, the penalty interest rate and late fees.

Although these are important factors that can help you choose the right credit card, there are still some little-known facts that can make or break your creditworthiness once you’ve decided on a card and have started using it. Here are five secrets that credit card companies won’t always tell you directly, but that you can use to your advantage when building or maintaining your credit profile:

Credit Card Companies Can ‘Snoop’ on How You Pay on Other Cards

Most people realize that payment history on other accounts directly impacts their credit scores, which in turn affects whether or not their credit card application is accepted. However, this initial check is not the only time that your payment history can affect your credit card account.

If you are consistently late or over the limit on your other credit card accounts, some credit card companies will raise the rate you pay on their card, even if you’ve never been late paying them. The rationalization is that if you have poor payment performance on one account, theirs is likely to be impacted in the future.

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They Can Raise/Lower Your Credit Limit at Any Time

In the same vein, how you pay other accounts can also affect your credit limits. Late payments to other accounts or going over your limit on other accounts can cause your credit limit to be lowered on accounts where your payment history and credit utilization is satisfactory.

For example, let’s say you have a credit card with a $10,000 limit that you pay on time, and never use more than 20% of the balance. And let’s also say you have a credit card with a $5000 limit that is maxed out, and you’ve been late on a few payments. The company that issued the $10,000 credit card may decide to lower your credit limit significantly, even if you’ve never been late with a payment for them.

This will directly impact your ability to get new credit, as part of your credit score is based on your credit utilization and lower credit limits are seen as higher risk and can lower your credit score.

You Can Ask for a Credit Limit Review Any Time

On the other hand, if you have a good payment history across all of your accounts but haven’t gotten a credit limit increase, in most cases you can just ask for one. Some credit card companies make this easy and automated. To see if your credit card company is one of these, just log into your account and look for a link that says “Credit Limit Increase” or “Credit Limit Review”.

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Otherwise, you can call customer service and ask directly. In most instances, you can ask for a credit limit increase every six months.

Be aware that this may incur a hard inquiry on your credit file depending on the credit issuer, so don’t request credit limit increases on all of your cards at the same time.

There are a few credit card companies that do automatic and periodic reviews, in which case you won’t be able to ask but you should be seeing regular limit increases if your payment history and credit scores are satisfactory. If not, call and ask about their criteria for raising credit limits so you know what you need to improve in order to qualify.

Paying Early Cuts Your Balance Faster

Nearly all credit cards charge interest on your average daily balance, and most cards have a 30-day grace period so that if you pay off your statement on or before the due date, you don’t accrue interest.

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If you can’t pay off your entire credit card balance, the next best thing is to pay early. Why? Because lowering your balance early in the month lowers your average daily balance, which in turn lowers the amount of interest you pay for your purchases.

For example, let’s say you have a $1,000 balance on your card. If you pay $100 off immediately, you’ll only pay interest on the $900 balance remaining throughout the month. If, on the 15th of the month, you make an additional $100 payment, your average daily balance will be calculated like this: (15 x $900 + 10 x $800)/30 = $850.

Therefore, instead of paying interest on the full $1,000 balance like you would if you waited to pay at the end of the month, you’ll only pay interest on $850. This adds up in the long run, especially when you have higher balances.

You Can Ask for (Some) Penalty Fees to be Waived

Let’s say you get a payment in a few days late, and are hit with one of those pesky $30+ late fees. Nothing to do but pay up, right? Wrong.

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If you have an excellent payment history with the credit card company, in most instances you can request to have that fee waived. It’s generally not something that you can request online. You’ll need to call in to speak to a representative, and expect them to scrutinize your past payment history and credit utilization before agreeing.

Usually, you can only make this request once per year, or once every six months at the most, so don’t waste it.

To Sum Up…

Credit card agreements have a lot of confusing terms and conditions in the fine print, but there are ways to use these to your advantage if you are savvy and keep track of how you are using your credit. Pay attention to how much of your credit you’re using on each card, pay early, and make sure you are getting credit limit increases in order to improve your credit scores a

Featured photo credit: Paper money, extreme macro/Kevin Dooley via flickr.com

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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