5 Must-Know Credit Card Facts That Could Save You Money

Credit cards can be very potent tools in the right hands. However, in the wrong hands, they create too much debt and financial stress. The average American household owes approximately $6,473 in credit card debt. Therefore, one should know how credit cards work. If you are a new credit card holder or an old player, here are five things you should know about credit cards that you do not know!

1. Credit Card Companies can raise interest rates without bound

You might have applied for a credit card with an interest rate so low it is considered very competitive; you did not know that issuers can raise them at will? Unlike most other financial products, credit card interest rates are not capped by state laws, so issuers are free to raise them at any time they choose.

Most credit cards offer a promotional fixed rate for at least one year. Although you pay every payment on time, the rate may still hike. On the other hand, the issuers and credit card companies keep holding the rates lower as no firm wants to be tagged as the company with the highest APR.

2. You Don’t Have to Accept a Rate Hike

Most of the card holders do not know the fact that they can decline the high interest rates. The issuer will inform you that they will increase your rate. You, therefore, are at liberty to decline the rate at this point in time. Some companies will take time deliberating with you as a result of which, you will end up retaining the current rate.

Check your credit-card agreement to learn specifics regarding this right. In case you will decide to exercise this option and exclude yourself from this interest-rate hike, the adjustment should be documented.

3. Credit Cards Offer Potent Consumer Protections

The greatest advantage of credit cards is protection. Should your product never turn up after having placed an order or you receive broken or wrong product after buying online, your credit card company may assist you with this situation also. 

This kind of protection shields you from full charges that actually incurred without your know-how. In cases where your card is lost or stolen, you are liable for the amount of $50 only.

This aside, you receive purchase protection from your credit card; you are, after all entitled to dispute any charges under given conditions. You may, of course, still face some kind of restrictions-say, in terms of amount a purchase needs to generate and geographical restrictions.

4. Fixed interest Rates Not Always Permanent

If you believe your fixed-rate credit card will always be the same, think again. Credit card issuers have the ability to change interest rates and even convert a fixed-rate card into a variable-rate card.

Fortune for you, issuers are contractually bound to notify you at least 45 days before they make any such changes. This gives you time to search elsewhere for a more favorable option, perhaps transferring your balance to a lower-interest card.

5. “No Spending Limit” Cards May Have Hidden Restrictions

Some credit cards offer no spending limit for cards, while this does not mean that you can buy whatever you want. In other words, a card with no spending limit may only limit the carryover of the amount between the billing cycles.

For example, if you put up $7,500 on the no-limit card but can only carry $5,000, you will be left owing the balance of $2,500; thus, checking the terms of the card before requesting it is also important to avoid having any surprise charges made.

Conclusion

All the convenience, rewards, and financial flexibility associated with credit cards come with pitfalls you need to be aware of. Understanding interest rates, consumer protection, and spending limits will help you make informed decisions about using credit cards to avoid costly mistakes.

Always read the fine print when applying for a credit card. You also have a right to contest an interest rate increase if needed. Smart credit management can actually make you get more out of it while remaining under control.


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