First off I want to say that credit card providers are not intrinsically evil. They allow you to make large purchases on credit, that you would otherwise not be able to make, as you do not have enough cash at time of purchase. If you have read the terms of agreement of your credit card carefully, and follow all the ‘rules of engagement’ of your specific card, then you can benefit greatly from the service that credit card providers offer.
Having said that, it is not difficult to see that many credit card companies somewhat ‘prey’ on those who do not read the fine print before signing a credit card agreement and, above all, those who do not necessarily fully understand exactly how their specific credit card works, especially when it comes to late repayments fees and their real % APR.
If you are a regular credit card user, or you are about to get a new credit card, then you should have a read through this brief guide titled ‘How Credit Card Companies Try To Get You’ to ensure that your credit card will not end up costing you more than it should, which unfortunately is the goal of many credit card providers.
1. A low interest or even 0% interest introductory offer period, where the APR then jumps to a much higher than average APR, after a certain period of time.
This is a quite common way of credit card companies to acquire new customers. They offer you 0% interest on purchases for a specific period of time before hiking up the APR to an above average percentage to make money off of you once you in the process of repaying a large purchase over a period longer than the introductory offer period.
2. Low or 0% interest on purchases cards usually also come with a higher percentage on card balance transfers
Low or 0% interest on purchases cards usually also come with a higher percentage on card balance transfers which is usually not immediately stated when you are being offered the credit card. If you want to get a new credit card to ‘roll over debt’ from a previous credit card then make sure it also comes with a low balance transfer percentage so it doesn’t end up costing you more than necessary.
3. Credit Card companies can change your cards terms & conditions at any time
Yes, that’s right! Your credit card provider can contact you to tell you that your card now comes with new terms & conditions, which could include a higher % APR on missed repayments for example.
4. Your credit card provider might charge you a so called ‘Tiered APR’
Your credit card provider might charge you a so called ‘Tiered APR’ which means you could be charged 15% for up to $2,000, then 20% up to $5,000 and 25% up to $10,000 for example. This can easily lead to your credit card becoming a very costly affair if you are making large purchases with it.
5. Your credit card provider might charge you ‘Tiered Late Fees’
Similarly, to charging a tiered APR your provider might charge you tiered late fees. Meaning that the higher the amount you missed to repay on time, the higher the late payment charge becomes.
6. Credit card providers are using some very nifty targeted marketing
Many credit card providers are using some very nifty targeted marketing to lure you into credit cards with sub-optimal fee structures & APRs. A good example would be the NFL Extra Points Card which offers various NFL related “extra benefits” such as 20% off the NFL online store, but comes ‘with a variable APR of up to 29.99% depending on your creditworthiness’. 29.99% APR, in my opinion, is not a good deal!
7. Your credit card you will likely be charged a 2-5% ‘cash advance’ fee
If you find yourself in a situation where cards are not accepted and you need to take out cash from your credit card you will likely be charged a 2-5% ‘cash advance’ fee. So you may be charged up to 5% just to take out cash from the ATM if you use your credit card. But it doesn’t stop there when it comes to cash advances. Often you are also charged hefty interest immediately, without the usual 30 day grace period. Were you aware of that?
8. Credit card providers often enforce cascading fees
Credit card providers often enforce cascading fees when you break a clause in the terms & conditions, such as making a late repayment. In that case, you could potentially not only be charged a late fee but, depending on the fine print in your credit card agreement, also see an increase in % APR on your outstanding credit card debt.