A credit card is a thin rectangular piece of plastic or metal emitted by a bank of financial services. It allows cardholders to borrow funds from the merchant who accepts cards for payment to pay for goods and services. Credit cards require cardholders to refund borrowed cash in full and over time, as well as any applicable interest and any additional agreed fees. Read on and see if you’re surprised about any of these 5 things you may not have known about your credit cards.
Every day you rely on plastic, whether you buy food or gas, shopping on Amazon or taking advantage of certain points of rewards for traveling. However, whatever your cards and your credit knowledge are like, I bet that you don’t fully understand a few nicer items on your credit card. Don’t you believe me? Do not you believe me? Well,
1. Even if you pay off your balance in full, your credit score continues to suffer.
You know that interest in credit cards is something you want to avoid, if you are credit-savvy and good at personal finance. It’s interest at the end of the day that can make your purchases more expensive, which can lead to a huge debt. So conventional wisdom goes something like that to avoid credit card interest:
Before any interest increases, pay off the balance at the end of the month.
That’s certainly a good tip, but it’s not thorough enough, believe it or not. Sure, you will not get this advice, but it will not be optimal for your credit. That is because in most cases the creditor informs the credit office about your outstanding balance before making a final reminding. In other words, your balance has probably already been reported if you pay at the end of the month. You will want to direct your creditor and ask them which day of the month they report your balance to your offices to reduce this and to minimize your credit impact. Set monthly reminders so you can pay off your balance in full before the due date. If you add more payments to your account between that date and the end of the month, you’ll need to make a second payment to avoid accruing interest.
2. Fees are negotiable on an annual basis.
In many cases, credit card charges, especially annual charges, are negotiable. Like many negotiation types, you sometimes have to ask everything you have to do. If you have an American Express or something that requires an annual membership fee, ask for that exemption. Perhaps you can’t do it all the time, but it is worth trying every few years. Please remember your cardholder loyalty’s customer service representative and how much you do with them. On the other hand, tell them about the great offers you received by mail, which seem to fit you better. These negotiation tactics may only give you a lower or no fee.
3. It’s just a phone call away from a higher credit limit.
It could be quite easy for you to have a higher loan limit if you were responsible for your credit and spend a lot on your card. If you are logged in to your account, you should be able to contact your creditor or use an online form. In general, after six months of a good credit history, you can easily ask to double your initial credit limit and do it.
Future limits will probably increase and they should be smaller. If you make a limit offer you want, the creditor can return with a lower counter offer, which is a good idea in many cases. This is important not only because it encourages you to spend more money, but also because it can improve your credit score. Any balance you have would show up as a lower usage ratio with a higher limit reported to the bureaus. You’re using 50% of your available credit if you have a $6,000 balance and a $15,000 credit cap. If your credit cap was $30,000, your credit utilization rate will decrease to 25%, potentially improving your credit score.
4. Rewards aren’t always the best bargains.
Credit card rewards are all the rage these days, and the excitement is justified in some situations. Consumers, on the other hand, often become overly enthusiastic about credit card rewards and overspend as a result. Look out for two key pitfalls:
Rewards based on the amount of money spent.
These are not a good idea, particularly if your credit card gives you cash back. It just does not make sense to exchange 200 loyalty points for a $200 Wal-Mart gift card. In that case, it will be much easier to simply return the money, as this would leave you with $200 that you can spend anywhere you choose, rather than $200 that must be spent at a specific store. A better deal would be a $200 Wal-Mart gift card for just 80 points. These are more uncommon, although they do appear during special events, such as during the holidays. While these can be a nice deal, we must be wary of falling into the pit of taking an unnecessary deal.
If your credit card offers a discount on travel or retail transactions, for example, it can be hard to resist. They are, in truth, excellent bargains. However, even 50% discount on travel booking isn’t a good deal if you don’t need to travel.
5. It’s Not Just a Series of Numbers
While die-hard online shoppers probably have their credit card numbers memorized, we don’t really think twice about them. They do, however, reflect a special combination of issuer numbers, bank numbers, account numbers, and check digits, believe it or not. The first number on the card is determined by the credit card company you use. Credit cards provide customers with a variety of purchasing options, but they must be wary of retailers pressuring them into financial conduct that benefits them. Credit cards, on the other hand, are truly a consumer tool, and customers are encouraged to use their credit cards portal to receive benefits they may not have known about previously.
The issuer may also grant a separate credit line (LOC) to cardholders, allowing them, through bank accounts, ATMs, or credit card convenience checks, to take money as an advance in cash. Such cash advances typically differ from transactions accessing the principal credit line in terms such as no grace period and higher interest rates. It usually sets borrowing limits on the basis of a credit rating for an individual.
A wide majority of companies can buy credit cards from the customer that remains one of the most popular methods of payment today for consumer goods and services. Many national retailers issue branded credit card versions with a name on the face of cards, in order to produce customer loyalty. Even if it is typically easier for consumers to qualify for a credit card in a shop than a major credit card, shopping cards may only be used for purchase from issuing retailers who may offer special discounts, promotional notices or special sales to cardholders.