Max Anderson
Credit Card Rates: 7 Things You Need to Know
Navigating the sea of credit card rates isn't exactly a
breeze -- and the credit card companies make it that way on
purpose. The more murky the waters, the more room they have
to make money (and money is the name of the game for the
credit card industry).
In order to fully understand credit card rates, you have to
keep the following seven credit card fundamentals in mind:
1. Corporate Office vs. Used Car Lot
If you had to picture the average employee at your credit
card company, what type of individual do you imagine? Is it
a professional in a suit? If so, you'd better change that
perception in order to understand the world of credit card
rates.
Think of the credit card company as a used car lot -- they
want to razzle you and dazzle you with low credit card
rates in one hand and then pile on the hidden charges with
the other hand when you're not looking.
2. The Rate May Not Be Set In Stone
When it comes to credit card rates, the interest you pay in
the beginning may not be set in stone -- especially if that
interest rate is exceptionally low. Let's face it, the
credit card companies are in the business to make money.
If they charge you 0-percent interest for the life of your
account, they aren't going to make a dime. If they charge
you 4-percent interest for the life of your account,
they're not going to make enough to be happy.
When a credit card rate starts out very low, it goes up
eventually. Read the entire credit card agreement so you
know exactly how much you'll be paying, and when.
3. Somebody's Watching You
The world of credit card rates is like a web. The credit
card rates you get from Company A, B and C do depend on how
you pay your bills with company D.
How so? Because of the notorious universal default clause.
Basically, this part of your credit card agreement (and
your agreement does indeed have this clause) states that if
you pay any of your bills late and the credit card company
finds out about it, they can hike your interest rate
skyward -- regardless of your payment history with them.
4. They're Not The Be-All, End-All
If you shop for credit cards based on credit card rates
alone, you're doing something wrong. Unless you carry a
high balance on your credit cards, there are other factors
you should consider when selecting the one that's right for
you. Things like cash-back awards and other credit card
perks should be considered -- especially if you pay your
balance in full each month.
5. It Adds Up Over Time
The biggest mistake people with low credit card rates make
is thinking they can charge up a large amount of debt
because they're paying it off at a low interest rate.
Remember, no matter how low your credit card rates are,
it's still cash out of your pocket and over time the amount
can add up.
6. Credit Card Rates Can (and do) Change
Even if you pay your bills on time each and every month --
even if your credit gets better and better -- your credit
card rates can still go up.
Why? Because credit card rates are not necessarily fixed
rates.
If the bank's cost of borrowing increases or if the bank
merges with another bank (which is not uncommon), your
interest rate may take a hike.
If you carry a high balance on your credit cards, changes
to your credit card rates can end up costing you a pretty
penny. Because of this, it's always wise to keep your
credit card debt as low as possible.
7. Three Words to Remember
The final fundamental I would like to leave you with in
regards to credit card rates comes down to three little
words (and they're not "I Love You").
What are these three magic words? "Lower my rate."
Yes, you read that right. If you think your credit card
company is charging unreasonable credit card rates, call
them up and tell them you want them to lower your rate or
you'll transfer the balance elsewhere.
If your credit is in good standing, you may actually get
your wish. Remember, credit card rates (like most things in
life) are negotiable.
----------------------------------------------------
For more tips on getting the best credit card, saving money
and avoiding getting ripped off, try visiting
CreditCardTipEetc.com - a website that specializes in
providing credit card tips, advice and resources.
