Debt Consolidation

5 Things That Credit Card Companies Do But Never Tell

There are some little-known rules that most (if not all) credit card companies follow without ever telling you about it. Those rules do not just cost you money but they also put your family, your identity, and your credit at risk. Following is a brief rundown on 5 such “rules”.

“We Never Lose Any Opportunity To Screw You Up”

Yes, that’s the first rule. Companies do not miss any opportunity to raise the interest rate. It is true that there are laws that restrict such practices (increasing interest rates unreasonably); there are still several loopholes. For example, if you have missed some payments on one of your credit cards and other lenders find this out while reviewing your credit report, they will use this as an excuse to raise interest rate – they call it “risk management”. However, you have also been given certain legal rights to protect yourself. As per the Credit Card Accountability Responsibility and Disclosure Act, no lender can increase the rate on any ground on the balance you are already carrying. The new rates must apply to future purchases only.

“There Are Provisions For Advance Notice, But The Consumers Have Limited Options”

With the introduction of the Credit Card Act, it has now become mandatory for the credit card companies to inform the consumers about any new changes at least forty-five days in advance. Besides that, even consumers have the right to reject any such new changes that the lender is trying to impose. If the consumer does not accept the new terms, the lender has two options – they can either close your account or continue with the existing terms until the expiration date of the credit card. But, there’s a catch – if you close your account, it will reduce your credit score; and, if you accept the new terms, you will have to pay the balances on higher rates. Your options are very limited.

“It Is Not Our Responsibility To Protect You From Identity Theft”

Though many credit card companies do claim to offer protection to their customers against identity theft, but in reality, there is no way to make sure that your identifying information will not be compromised. You cannot hold the company responsible for any loss caused by identity theft. Most credit card issuers will charge at least $50 of unauthorized charges, but they waive off the rest of the losses if it is proved that you have become a victim of identity theft. Many companies these days however have started waiving off even the initial $50 charge in an attempt to ensure consumer trust. In any case, it is entirely your responsibility to protect yourself from identity theft. For example, if you are using your credit cards for online transaction, make sure you perform the transaction at only those websites that have URLs beginning with “https://”. The web address must also contain the image of a padlock. You must use most up-to-date anti-virus software on your PC. You are also recommended not to respond to emails that ask you to provide your personal identifying information. You may get Spam emails that look like as if they are from your credit card company (in reality they are not). If you are not sure if the emails are from your company, you must first give a call to your company and get it confirmed. Most importantly, you must notify your company immediately if you suspect that your credit card information has been compromised. If you inform them at a later stage, the company may not compensate you for the loss.

“We Offer Lucrative Reward Programs That Can Actually Throw You Off Track”

In order to target niche audiences, credit card companies often offer an array of lucrative reward programs, but what they do not tell you is that signing up for some of those reward programs can actually throw you off track. It is very important to do a thorough research and analysis in advance in order to decide whether signing up for a specific reward program is going to be beneficial for you. You must first figure out how much money you will have to spend in order to earn those “lucrative” incentives. Most importantly, you must have an honest picture about your spending habit. If you cannot control your spending, you may end up ruining your finances just to fulfill your temptations to earn more incentives. For example, if you are considering signing up for travel rewards, make sure you have a clear understanding about the terms on blackout dates and other limits. Likewise, if it is a cash-back offer, you must first enquire if there is a ceiling over the maximum amount you can earn as part of this program. Things can be more problematic for those who never pay their balances in full. In order to utilize the reward programs, they spend more and thus their balance keeps on increasing. Since they do not pay their balances in full, they end up paying a much higher amount of money in terms of interest and other charges. Such consumers should stay away from reward programs.

“Deferred Interest Plans Look Attractive But They Can Be Very Risky”

The deferred-interest plans that credit card companies offer can turn out to be a very costly affair, especially when you fail to pay off the balances within the promotional period. As part of these plans, you are offered an opportunity to make a big purchase (such as watches, electronics, furniture) at zero percent interest. But, this special offer is valid for a limited period of time only, usually six to twelve month. If you fail to make the repayment in full within this period, the companies will use this opportunity to hike your interest rates. What is worse, you may be charged even for the promotional period. So, you will not be able to take advantage of the 0% interest offer; instead, you will end up paying at a comparatively much higher rate than usual. Therefore, if you are considering signing up for deferred interest plans, do so only if you are sure that you will be able to make the repayment within the promotional period. Still, the risks are always there because uncertainties are the only certain things in this world. What if you get sick or lose job?

Overall, we can see that the bottom line for credit card companies is to make money from you. But, it does not mean that you should stop using credit cards at all. It is just that you must use it wisely. Awareness about your legal rights is also very important. Most of the times, consumers have pay for their ignorance. The more you are informed about the hidden catches, the better you can protect yourself.


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Posted in Credit Card Debt Consolidation, Debt Consolidation | 1 Comment »

One Response to “5 Things That Credit Card Companies Do But Never Tell”

  1. Sams says:

    Credit card companies follow some rules which the companies never tell us. These rules are generally followed by most of the credit card companies. But such type of rules can give us a lot of trouble and can affect our credit record also. It is a misconception that the companies follow this rule as its name but the fact is companies do not want to miss any chance of increasing the interest rate, these all can be done by using the term Risk Management. But now the new ruling does not allow the companies to raise the interest rate on the existing balance. The companies have to inform its consumers about any new changes at least 45 days before the date to commence. Whenever you apply for a credit card, the companies offer you to give the full protection against identity theft but in reality they have to charge a minimum amount in case of identity theft. Companies offer you some very exciting packages with a zero percent interest scheme. These offers seem very attractive but do not prove good. So, it is OK to use the credit card but you have to use it with great cautions.

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