Get the Best Credit Card Deal
Payments are made via credit card for bills for purchases made or services availed of. The issuer of the credit card lends money to the consumer or the cardholder by meeting the commitment for these bills on their behalf. In turn, the cardholder pays the money bank to the lender according to the terms and conditions of the lender with or without interest as agreed by both. Credit card facility allows the cardholder to repay the amount in easy installments with an interest towards the loan.
A membership fee is charged either annually or monthly depending on the type of the credit card. It is a certain percentage calculated sometimes on the allowed credit limit.
The issuer of the credit card is benefited if the cardholder opts the monthly membership fees as more money is collected than the annual fees.
A fee is charged when the customer makes the payment; late that is after the agreed period for payment without fees.
Most of the credit cards have a limit on the amount of purchase which means the amount allowed for credit. When the person while making purchases exceeds the limit knowingly or unknowingly, is charged with the over limit fees.
When purchase is done in foreign currency, normally three percent of the amount is charged. Only a few credit card issuers do not charge any fee for this kind of a transaction.
While signing up for a credit card, it is very much necessary to go through the fees structure and policies of the card issuer. Due to a stiff competition in the industry, a lot of credit card issuing companies offer rewards and offers to make the consumer buy their card. Credit card issuers encourage the card holder by various incentives such as gift certificates, cash back offer which is based on the purchase made, (normally one percent is given back) frequent flier points for those who pay by credit cards for their air tickets, by encouraging the usage of credit cards.
The most common offer is being low interest credit cards or zero percent credit cards. But, unfortunately it is only for a given period of six months to one year after which the card issuing company charge exorbitant amount as interest. Also there are companies, which intimate the customer on expiry of the low interest period and charge a monthly or yearly fee for doing so.
A credit card with a trailing interest is said to be an unfair cost as to many it is of hidden nature. Cardholders are left to their dismay to find out that even after paying their credit in full, they need to pay the interest.
A lot of credit card issuers charge their customers a hidden tax on all transactions made through credit cards, as they need to compensate for the cost of transaction fees. The credit card issuers know that if the consumer knows the cost on transactions and other card services, it will decrease the sales. Thus surcharging and hidden costs are not made known to the consumer.
To get the best credit card deal, one needs to go through the reward schemes, offers made and fees charged very carefully to enjoy the benefit of holding a credit card to the maximum.
Flat Rate Credit Cards
When credit cards were first introduced, they were a pretty simple proposition: use your card for purchases, and be charged a single rate of interest on your unpaid balance.
Then came the rise of the ATM (cash machine), and credit card issuers realised they could lend money by allowing their cards to be used to withdraw cash on account, and could earn more this way by hiding away a higher interest rate for cash withdrawals in the credit agreement small print.
Next came the balance transfer offer, with either long term low rates or an introductory 0% deal, closely followed by introductory deals on purchases too. Not to forget the different interest rate often charged for overseas use.
All these different rates for different kinds of card use can easily become confusing, and survey after survey showed that many credit card users were unaware of how much their card use was actually costing them.
In many respects, this suited the card companies down to the ground as they could advertise eye-catching rates for purchases and balance transfers while quietly imposing more lucrative charges on other kinds of card use.
Amidst all the confusion though, some card issuers spotted a gap in the market – how about a simple, easily understood credit card with no offers or benefits, just a single low rate charged however the card was used? These cards became known as flat rate cards and their names usually reflected their transparency and ease of understanding, for example Barclaycard with their ‘Simplicity’ card, or the Co-op Bank’s Clear.
Whether you’re using one of these cards for spending, transferring a balance, or even withdrawing cash from an ATM, you’ll always be charged a single rate. And what’s more, most cards can offer a great low APR as the issuers aren’t having to fund expensive introductory deals or cashback schemes.
So is a flat rate credit card for you? The benefits are obvious – it’s easier to understand how much your card use is costing you, and you’ll also usually get a great rate.
If you have a large balance to transfer, it might be more sensible to go for a card with traditional 0% introductory offer or one that features a low rate fixed for the life of the transfer.
Likewise, if you use your card for purchases a lot but usually clear your balance every month then the interest rate doesn’t really matter to you, and you may prefer a card with a cashback or rewards scheme.
If however, like most of us, you use your card for purchases and cash withdrawals while carrying a balance from month to month, then a flat rate card could save you a lot of interest.
Factors That Trigger Credit Card Rate Hikes
Are credit card companies trying to scam you? On the one hand, they provide a valuable service that gives you the added convenience of being able to purchase items and services you need and sometimes don’t need and to pay them off in a manner that best suits you.
On the other hand, some credit card issuers are trying to scam you and they do everything in their power – legal or otherwise to do it. Legal or not, many of the practices they follow are clearly unethical and unless you are a contract lawyer you couldn’t determine how they planned on scamming you anyway because they hide everything in the countless pages of fine print that comes with every cardholder agreement.
According to Harvard Law Professor Elizabeth Warren, the credit card companies are misleading consumers and making up their own rules. “These guys have figured out the best way to compete is to put a smiley face in your commercials, a low introductory rate, and hire a team of MBAs to lay traps in the fine print.”
The problem is that the industry is operating without fear of penalty. There’s no regulator or customer who can bring this industry to task.
Deadbeat or Revolver
In the credit card industry there are two types of customers – the deadbeat and the revolver. Don’t take this the wrong way but hopefully you’re a deadbeat because in the lingo of the industry a deadbeat is someone who uses their credit cards the way they are suppose to.
As in they pay-off their balances each month and therefore incur no interest charges. No profit in that scenario and thus, if you pay-off your balances each month (about one-third of Americans do) then you should be proud to be called a deadbeat because you are using your credit cards wisely.
On the other hand, the majority of Americans are called “revolvers”. A revolver is someone who carries over a balance and is considered to be “the sweet spot” of the banking industry. This “sweet spot” continues to expand as the average credit card debt among American households has grown to about 8,000 — which is more than double what it was just ten years ago. This debt has helped generate record profits for the credit card industry in 2004, an estimated 30 billion before taxes.
The 0% Interest Offer
The game today is the “0% interest for 6 months” offer. Once again, this can be a legitimate and great deal if you know how to play the game (”deadbeat”) but if you don’t (”revolver”) it will end up costing you more money in the long run because after the initial 6 months the rate will usually jump up to a much higher rate than the normal purchase rate.
Rate Hike Triggers
The industry provides many reasons to justify rate hikes and in all fairness, some are actually valid. However, many are not and are just flat-out deceptive. One Banking Association spokesman said that, “Because the credit card business is unsecured lending, the risks associated with the business must be offset.”
Industry critics say that an ever growing share of the industry’s revenues come from deceptive tactics. One example is how the “default” terms are spelled out in the fine print of the cardholder agreements. The terms and conditions can be changed at any time, for any reason with only a 15 day notice.
Here are just some of things that can trigger late fees, penalties or rate hikes.
Late Payments
If you don’t pay your bill on time, the company seems quite justified in taking away your good rate. After all, you’ve broken the rules of your contract. The problem lies in the fact that penalty fees and rates are sometimes triggered by a single lapse or a payment that arrives just a few days, even a few hours late or a charge that exceeds the credit line by a few pounds or a loan from another creditor which renders the cardholder “overextended” as defined by the three all-powerful credit bureaus – Experian, Equifax and TransUnion.
In addition, the industry is raising interest rates, adding new fees and generating payment due dates on holidays and Sundays with their only motive being of tripping you up and hoping it will result in you making a payment late. The industry has become a very anti-consumer marketplace.
Spending on Other Cards
If you think that one card issuer doesn’t know with whom and how much you spend on other cards then think again. As a result, if you exceed your credit limit or make a late payment on another card it can trigger what’s called a “universal default clause” and result in higher rates on other cards – cards that you may have had for years and never had a late payment.
Defaulting on Non Credit Card Bills
Defaulting on any bill (utilities, cell phone, mortgage, etc) can trigger higher interest rates on your credit cards. Every bill you have is tracked by the 3 primary credit bureaus and with the emergence of technology your information is readily available to any card issuer. So if you default or pay late on anything, they’ll spot it and it could result in higher rates on some or all of your credit cards.
Some experts say the profitability of credit cards began twenty-five years ago when the banking industry successfully eliminated a critical restriction: the limit on the interest rate a lender can charge a borrower. Deregulation, coupled with a revolution in technology that enables the almost real-time tracking of personal financial information and the emergence of nationwide banking, has facilitated the widening availability of credit cards across the economic spectrum. But for some, the cost of credit is often far greater than it appears.
If your rate is suddenly increased, the first thing you should do is cancel the card and move the balance somewhere else. If you can’t do that for whatever reason, then contact your local consumer protection agency and if all else fails you may need to contact a lawyer.
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