5 Things Your Credit Card Company Doesn't Want You to Know

Credit cards are a tool. A powerful tool, to be sure. But still just a tool. As a CERTIFIED FINANCIAL PLANNER™, you might expect me to immediately be critical of using credit cards. That would be the wrong assumption. Our family uses a credit card for a lot of the reasons many people do: airline points. We use the miles (at least, we did pre-pandemic when people used to get on planes) for purchasing flights to where my wife grew up in the Midwest. Then, as I typically recommend to clients, we pay the balance in full each month (surprise, surprise...I'm not a fan of paying exorbitant interest rates).

Just like any other tool, the key is how you use it. If your debit card is analogous to a handsaw, your credit card is like a chainsaw. The chainsaw can get a lot done, but it can also be incredibly harmful if not used correctly. Since nearly 170 million Americans have credit cards - about half of us - it's time to be smarter consumers by learning these five top secrets credit card companies don't want their customers to know.

Tip #1: Paying Early Cuts Your Balance Faster

Most credit card companies charge interest on your average daily balance. If you can’t pay off all your balance at once, consider if paying some of it early makes sense. This is a case where some is often better than none. With the average credit card annual percentage rate (APR) in the U.S. currently over 15%, money going toward interest adds up fast. If you regularly carry a credit card balance, it may be smart to pay down some of what you owe on your payday.

Tip #2: You Can Ask for a Waiver of Some Penalties and Fees

If you find yourself with a late fee, don’t hesitate to call your credit card company and ask for the fee to be waived as a courtesy. At first glance, you might think there’s nothing to be done and you’re stuck paying up. But credit card issuers are often more open to waiving these types of fees - especially those that are only levied by the card company itself - than many people expect. This is especially true for cardholders that have a great credit record and are otherwise in good standing. As a general rule of thumb, most companies will waive a fee once per year, maybe twice depending on the situation.

Tip #3: Credit Card Companies Probably Need You More Than You Need Them 

Similar to the point above, if you're in the process of searching for a lower interest rate, call your credit card company and ask for it. Credit card companies make money from your spending and, believe it or not, this gives you some power. If you call your card issuer and mention that you are shopping around for a better rate and/or have received a more competitive offer elsewhere (and you have a good credit score and are up to date on all your payments), chances are that they will be ready to negotiate and give you an attractive rate. 

Tip #4: Your APR Will Dramatically Increase if You’re Not a Smart Card User 

If your credit card has a reasonable APR, be sure to keep it that way. Any mistake on your part - whether it's late payments or spending over your limit - can significantly increase your APR. The good news is that not every card comes with this particular penalty. Therefore, if you’re applying for cards, make sure to read the application closely to see if this applies to you. 

Tip #5: Card Companies Can See Your Credit History

Credit card companies can actually look at your credit profile and raise interest rates if they notice some bad behavior. If you made a mistake on another credit card or even a loan, you might end up paying more on your credit card balance too. If you find yourself accidentally late on another loan payment, check to see if your interest rates have changed. 

Now that you’re aware of some of the top things credit card companies don’t want you to know, you are better equipped to make smart financial decisions. Remember to read the fine print in your card applications so you don’t let anything else slip by. As the consumer, you have more power and knowledge than you think - use that to your advantage in order to save money for the more important things in life.

Interested in learning more about how ViviFi Planning helps clients make smart financial decisions? Get started with a no-pressure, complimentary conversation with us.