10 Common Credit Card Company Tricks You Need to Know About

By Chika

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Last Updated: December 23, 2021

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Credit cards have a lot of benefits when used properly. They can come in handy during emergencies and provide short-term relief. However, some credit card companies may take advantage of this need to pass on spurious charges on your account.

If you do not keep track of your accounts, these subtle underhanded dealings can set you back financially. Here are some of the common tricks that credit card companies use to overcharge your account. 

 

10 Tricky Things Credit Card Companies Do

1. Cash Advance Fees

Most people lose hundreds of dollars because they fail to read the fine print on cash advances.

The tiny print states that if you make certain sorts of transactions using your credit card, they will be classified as a cash advance right away. This includes items like gambling, bail bonds, and even money orders.

Many people take up financial advances from credit card issuers without realizing it.

Credit card issuers often charge not just the fee, but also extremely high-interest rates for these subtle advances. Unlike standard credit card charges, these interest rates have no grace period, which quickly accumulates adds to outstanding expenses. 

For individuals who do need or want to take out cash advances, it's crucial to compare cards and check what the cash advance conditions are to obtain the best deal available.

2. Incentives attached with conditions

Sign-on incentives given by credit cards are popular with many individuals. Simply by signing up, people might frequently receive a hundred dollars or thousands of airline miles. But it is not as straightforward as it seems as there could be hidden conditions attached to these incentives.  

One of the most typical ways credit card issuers give these incentives is by requiring a certain amount of money to be spent on the card within a certain length of time. It might be as much as $500 in a month. 

Another incentive credit card issuers use to lure customers is by providing a greater percentage back. However, this does not apply to all purchases but is limited to select businesses or retailers. They also come with time and expense constraints. 

As such, you need to spend a specific amount of money to qualify for such an offer. You also need to do this within a stipulated time, otherwise you would not be eligible for the rewards. This makes you prone to overspending to obtain the benefits, thus fueling a never-ending cycle of constant buying and card swiping.

3. Arbitrary reduction of credit limit 

A credit limit is assigned to everyone who applies for a credit card. Unfortunately, you are not obligated to be alerted if your credit limit is reduced, and credit agencies are free to do so at any time.

What's worse, your credit limit might be cut to the point where you're overdrawn, and you'll be hit with fines right away. This can become a steep challenge for those who can't pay the amount required to go back under the limit, and the debt piles up.

The only way to avoid this is to keep your card utilization ratio as low as much as possible.

4. “Attractive” Offers

When you get a preapproved credit card in the mail, you should be on your guard. There is a tendency to be carried away by this offer, but do not be fooled by the packaging.

Most times, you would have to apply for the card again and get completely authorized, just as if they hadn't preapproved you at all. Take a closer look and closely ascertain the authenticity of the preapproval status.

5. Double charge on late payment

When you miss a payment, you are charged once, right? Wrong. On the contrary, you are usually charged with a penalty fee which could be as much as $50. However, interest on the late payment may kick in 60 days after the due date. What's worse, the penalty interest rate could be as high as 24.99%. 

So, what can you do to ensure that you won't be stuck with that penalty rate? By keeping tracking charges on your account. Ensure that you are aware of when your bill arrives, and you must pay it as soon as possible, even if it is at the beginning of the month.

Alternatively, you can have a system in place to remind yourself before the deadline.

6. Extra Fees

You presumably read the regulations and at least skimmed the costs when you initially got your new card, but the way the system is set up, you're forced to begin a slew of various fees and penalties for breaching a single restriction.

For example, credit card companies now charge a fee for canceling your credit card. The cost is still new, but credit card firms and banks decided to profit from it as well because customers were recognizing all those extra fees and opting to cancel their cards as soon as possible.

You could also be charged an inactivity fee if you don't do anything. If you don't use your credit card for a certain period, you'll be charged this fee. Even if you don't have this sort of cost, you'll want to keep track of this regulation for a few reasons, which we'll explain later.

7. Zero interest rate 

A zero percent interest rate sounds good because we always want to avoid paying extra money on our loans. However, the way it works is that card issuers keep track of everything you would owe if they charged interest from day one.

Then, if you don't pay off the entire amount by the very last day of the agreement, you'll be charged interest starting on the first day, on the complete purchase price, not what's left.

Worse yet, interest charges are applied to your debt, so you end up paying interest on interest! Also, some issuers make up for the zero interest fee by charging high transfer fees. Some charge as much as 3%. So this is definitely a case of looking carefully before you leap. 

8. Upgraded Cards

Upgraded cards can be seen as an ego booster that adds to our social image.

Most people brag about their gold and platinum cards, which they see as being elitist or membership into an exclusive club. However, such cards also come with additional costs for the holders. 

Credit card issuers have perfected the way of introducing new sorts of unusual sounding cards which make holders look distinguished. The name of the card isn't what you should be looking at. Rather you should be paying attention to interest rates, fees, discounts, and limitations.

9. Initiating a Balance Transfer

Is your credit card company among those that mail checks?

That attractive blank check with a unique offer, such as no interest for a specified period, appears to be a good deal, but there are a few things to keep an eye on.

Many people believe that using credit cards to pay off their other debts is a good idea. However, utilizing the check may incur a significant cost of up to 5%. Another disadvantage is that you may lose out on larger and better discounts if you used a different credit card.

10. Increase interest rates without notice

Many people are oblivious to the fact that credit card issuers can raise interest rates arbitrarily.

Most times this occurs without the knowledge of the cardholder. Though interest rates are usually pegged to benchmark interest rates set by the Federal Reserve, card issuers can charge a little extra without any pre-information.

Worse, it is perfectly legal. They do this by tracking your credit record until they've decided what to charge you, and then they'll adjust your interest rate.

 

Key takeaways

Credit card companies are profit-driven organizations.

Sometimes they resort to underhanded tactics to charge you more money to shore up their revenue base. However, if you keep track of your accounts, you would observe these extra charges and nip them in the bud before they escalate to bigger debts on your account. 

Photo by Mark OFlynn on Unsplash

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