Credit cards - Your statement can hurt you, part 2

Be careful when you use your credit card, or your fees or penalties and interest rate could climb significantly. The bank card industry is a lucrative one, and you can effortlessly add to their returns by failing to examine the fine print that accompanies your statement each month.

Continued below

Credit cards let you purchase now and pay later if you will not have the money until later. Credit cards are superb tools; you can buy an item today when you will not have the money until next Wednesday. Charge cards allow people to shop at Amazon all you like from the comfort of your own home. Bank cards are extremely profitable for the companies that offer them, and a large amount of the profit comes from the hidden fees that are described in the billing statement, but infrequently read by the users who use them.

Here are some more items that unwitting customers might discover in the details of their billing statements if they would only take the time to read them.
 

Know your limit. Going over your limit will cost you a penalty and an increased rate, which could mean 30% or more permanently. The last thing you want is to move a big credit card balance to one card from another credit card, only to discover that you have exceeded a limit that is smaller than you thought. Just as your creditor can change your rate of interest, they can also change your limit.

Zero percent rate of interest - Be careful not to make a late payment when taking advantage of a low interest teaser offer, as a late payment could trigger dramatic increases in the rate. Consumers should read the statement about ultra-low interest rate advertisements, because only one payment made late could raise your interest rate considerably. Financial institutions will sometimes promote a temporary rate of zero percent. Promotional rates generally are good only for a stated length of time, such as 6 months.

Minimum acceptable payments - Most companies have now increased their required payment levels to those proposed by the Congress in 2003. The mandatory payment of two percent in the past was a nice, low, affordable amount, but by forking over so little you might be repaying your balance off indefinitely, which is just what your issuing bank would relish. Your best bet to avoid being harmed by minimum payments and compounding interest is to make an attempt not to keep a balance. Currently, minimum payments are typically about 4%, but paying more is ideal. In the past, the mandatory payment was usually just 2% of the outstanding balance.

The Universal Default Clause - The explanations for the Universal Default Clause don't really make sense, but on the other hand, the company needs no reason to increase your interest rate, as they can raise it for any reason of any kind. The reason offered for the UDC is that paying late makes you a risk to pay others late. If you make a late payment on any debt, your creditor will use this as the reason for increasing your interest rate. The Universal Default Clause is a rather new fee, and more and more companies are adopting it. Your creditor will check your credit report every now and again to see if you have made a late payment to anyone.

Examine your statement carefully when it arrives each and every month. Your statement could have all manner of expensive things hiding in it that you do not even know about. Even if you don’t know, it can hurt you.