Winning the Credit Card Game
It seems the better people get at paying off their credit card balances each month, the nastier the companies get. Why? This is because the better you are at paying off your balance every month, the less profit for the company. Companies are responding by becoming more creative in finding ways to make money off of you. Thus, it is more important than ever to master the rules of the game.
Rule 1: Don't be a revolver.
The first rule of credit cards is avoiding the evil "balance." Carrying a balance means paying far more than you should for everything you charge to your card. And it is one of the fastest ways to fall deep in debt.
Are you what the credit card companies call a revolver -- someone who carries a balance -- or are you a freeloader, someone who pays off their balance every month? With any luck, you are a freeloader. If you pay off everything you charge within the grace period, the time between when the purchase is paid and when your bill is due, you will not get stuck in the trap of paying interest. It is another story entirely for the revolvers who carry a balance from month to month. Revolvers get no grace period. They just get stuck paying more and more interest.
Rule 2: Read Everything.
Read every form from any potential credit card account with a magnifying glass. You may, for example, be asked to print your initials somewhere on the application. But read the small print and you find you have signed up for insurance -- credit card insurance, life insurance or disability insurance.
Also, make sure you read your bill... and anything else that arrives in the envelope. Issuers are free to change the terms of your card agreement with as little as 15 days' notice. Typically, the notice gets slipped in with your monthly statement and more often than not, it goes unread.
Rule 3: Avoid Late Fees.
Stay free of the triple whammy known in the biz as "tiering." One late payment and you are immediately socked with a late fee. Then, you have a larger balance and your minimum monthly payment has gone up too. Or, one late fee and your card issuer may hike up your interest rate.
Rule 4: Fight Back.
Is your credit card issuer squeezing you? COMPLAIN! Competition among credit card companies is fierce. Use that leverage to get what you want. Often you can get a late fee waived or your interest rate lowered just by asking. Most companies will make adjustments at least once.
Rule 5: Shop Around.
There are a lot of fish in the sea. There is no reason to hold a card that has a high interest rate or a short grace period. Go "rate surfing." Get the interest rate you want. Get a card with no annual fee. Compare the rates and terms of several cards.
Rule 6: Check Your Credit Report.
An especially dirty trick played by the companies is not reporting a good customer's on-time payment history to a credit bureau. So if you are planning on getting a loan, it is a good idea to ask whether the company is reporting your good payment record to the credit-rating bureaus when you check your credit report. But check a few months before applying for a mortgage, which gives you time to correct any mistakes.
Rule 7: Stop Spending.
Ultimately, this rule will make the most difference in your financial life (oh yes, and of course in your personal life). Make it hard to use your card. Don't leave home with it. Many people mistakenly believe they're on top of things as long as they make their minimum payments on time. But they're not. Keep a card on hand for emergencies. The rest of them, keep in the freezer!
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