The fast pace of modern life and need for instant gratification make credit cards almost a necessity for most adults. Many ordinary purchases require a credit card in order to complete the purchase or verify credit history. E-tailers such as Netflix require credit card or debit card even to redeem gift subscriptions and as anyone who has ever tried to buy a plane ticket, book a hotel room or rent a car knows that a credit card is required.Â However, credit cards are not all convenience.
What initially lifted credit cards from relative obscurity to marketing genius was the addition of fees and states with low usury laws.Â Most credit card users do not pay off their balances each month, and this is where the those hidden costs for consumers come in (and massive profits for banks).Â Most credit card companies are located in states where the laws governing loans (usury) are weak, so they can charge higher interest rates and fees.
Check Your Statement
The first thing is that you must check your credit card statement carefully each and every month.Â Credit card companies are entitled to change the terms of your credit agreement with as little as 15 days notice and without any justification.Â As soon as you notice terms that are no longer agreeable, call your company to negotiate better terms or switch to a new creditor.Â Another credit trick is â€œuniversal defaultâ€ in which credit card companies can increase your interest rate because you default on some other payment (electric or hospital bills, for example).
Do More for Your Principle
Next, it is important to understand that the credit card companies anticipate that you will stretch out your payments on the amount you owe for as long as possible.Â The minimum payments are set low enough that those payments barely touch the principal, if at all.Â In fact, it is not unheard of for some consumers to find their balance rising in spite of paying minimums every month.
If it isnâ€™t possible for you to pay of the entire amount due, pay off as much as you can.Â However, if doing this will force you to charge more, this is not a sound strategy.Â The idea is to pay off as much as possible and decrease your reliance on credit.
Donâ€™t Be Late
One major source of income for credit card companies are late fees.Â Companies can charge as much as they like for late fees, with the average running right around $30 presently.Â This late fee can be in force if your payment is no more than a few minutes late!Â This is also one of the single biggest factors in determining your FICO score (your credit score), so this is really a deadline you canâ€™t afford to miss.
Keep Track of Limits
Going over your credit limit can cost you big as well, often at least $35.Â This can then lead to your interest rate rising as well as lowering your credit score if you donâ€™t pay off the overage right away.
With just a little extra vigilance on your part you can ensure that your credit history is rock solid, without losing a fortune to fees and spiraling interest rates.