7 little-known facts about your credit card
You have memorized the interest rate of your favorite credit card, the credit limit and its advantages. You use it strategically to make the most of the rewards it offers. Think you know everything about your favorite credit card?
Even if you’ve had the card for a long time, it might have a few surprises in store for you. Card issuers and the government continue to change card rules. Interest rates and credit limits may go up or down depending on your situation or that of the card issuer. And then there are those uncommon details you may have missed.
Here are seven credit card facts you probably didn’t know.
Little known facts about credit cards
Fact #1: Your credit card interest rates can change.
You signed up for a nice credit card and are excited about the low APR you have.
But here’s a scary, little-known fact: many card issuers can raise interest rates as high as they want.
The top 10 banks that issue credit cards are federally chartered banks and are not bound by state laws limiting interest rates, which means they are free to set rates as high as they want it.
Your interest rate is only protected for the first year of the card (or the first six months, if it’s a call rate), under liability law, liability and disclosure of credit cards, or Card Act. Plus, if you’re 60 days late on a payment, that protection also disappears.
A floating rate (which most credit cards have) is linked to an index and may also rise if the index rises. But even if your credit card has a fixed rate today, that doesn’t mean it always will.
In addition to changing your interest rate, card issuers can change how your rate is calculated, says John Ulzheimer, president of consumer education at SmartCredit.com. So a fixed rate card could become a variable rate card in the future, he says.
Two caveats, courtesy of the CARD Act: an interest hike will only apply to the new fee (your current balance will be assessed at the old rate), and the issuer must give you 45 days’ notice.
On a more positive note, your higher rate may not last forever. If your issuer raised the rate after you paid your bill late, or not at all for two consecutive months, your rate could go back down.
Under CARD law, the issuer must review your account after six months. If you performed well, the issuer can reset the APR to your pre-penalty rate.
Fact #2: You can say “no” to a change in interest.
If your credit card issuer raises your APR, you can say “thank you, but no thank you,” under CARD law.
It’s possible the company will make you a deal and let you keep the old interest rate (get it in writing), Ulzheimer says.
However, keep in mind that it’s just as likely that the issuer will reduce your line of credit, increase your minimum payment, or simply close your credit card, he says.
What the issuer cannot do is require you to pay the entire bill on short notice. If you refuse the new rate, you have at least five years to settle your balance under the old rate.
Fact #3: Your credit card can protect your purchases.
You buy something online, and it never arrives. What you ordered in the store is not what is delivered. A charge appears on your bill that is not yours. Don’t worry, your credit card has you covered.
Credit cards offer certain consumer rights that can provide powerful protection.
For example, the maximum liability for unauthorized purchases on a stolen or lost credit card is $50 under federal law, although most issuers offer no liability. However, if you report the loss before your credit card is used, you are not responsible for any charges you did not authorize.
Moreover, the Fair Credit Billing Act allows cardholders to request a refund from their credit card issuers for an unsatisfactory purchase. The fee must be at least $50 and the purchase must be made within 100 miles of your home. You must also have made an effort to resolve the issue with the seller first.
In addition to federal rights, some cards offer return protectionprotection against loss or damage to goods or extended warranties. Check your card’s terms and conditions to see what protections your card offers. Knowing these lesser-known details can sometimes save you hundreds or even thousands of dollars.
Fact 4: Your card may be refused abroad.
When traveling abroad, be sure to bring a card that may be accepted abroad.
When I was visiting family in Russia a few months ago, I was excited to take my mom out for lunch or dinner whenever possible – and maybe earn 5% cash back with my Find out® Cash Back (up to $1,500 in purchases per quarter when enabled, then 1%), since restaurants were a bonus category this quarter.
Unfortunately, none of the restaurants I visited in Moscow and St. Petersburg accepted Discover. The same thing happened for my American Express® Gold Card. Despite the card offering 4X points at restaurants “around the world”, I did not earn any rewards on my trip due to limited Amex acceptance.
My Mastercard and Visa cards, on the other hand, worked just fine everywhere I went.
When traveling abroad, be aware that some of your cards may not work. Although Visa and Mastercard are safe bets, sometimes you’ll even have to rely on cash, as it’s still the preferred method of payment in some places.
You should also inform your credit card company in advance of your overseas travel plans. Otherwise, the issuer may temporarily suspend billing privileges due to fraud concerns.
Fact #5: Card balances can be tricky.
If you know how credit worksyou know it’s best to pay off your card in full each month and maintain a low credit utilization rate (or how much of your total credit limit you are using expressed as a percentage).
To establish or maintain good credit, make sure you never carry over a balance by always paying in full before the payment due date.
However, that may not be what your credit report tells lenders. Which give?
The problem is that credit card issuers usually signal soon after the end of the billing cycle, which can be a few days or even weeks before your payment is due.
So if you haven’t paid your bill yet at the end of the billing cycle, the amount you owe will be reflected on your credit report. If the amount is high (more than 30% of your credit limit), it can seriously affect your credit score.
This can be a minor issue if you pay off your card in full and it’s reported on the next billing cycle. However, if you’re preparing to apply for a large loan, such as a mortgage, an unexpectedly high credit card balance on your credit report can be bad news.
To avoid this, it’s best to always know where you stand with your credit card balances and settle them as soon as the transactions are posted.
Fact 6: Late payments have an impact.
Your bill is overdue if your payment is received after the statement due date. This means that your credit card issuer may charge you late fees. So your credit is also blemished, isn’t it?
No. Your issuer cannot report an overdue account to the credit bureaus until the invoice is 30 days past the due date, according to the credit bureau’s reporting guidelines. And it can only raise your rate if you’re 60 days or more overdue, according to CARD law.
“I think it’s one of those big secrets that a lot of consumers don’t know about,” Ulzheimer says. “Delinquency means you have a full cycle of delay.”
In addition, issuers cannot set noon deadlines for payments under the CARD Act. The deadline is 5 p.m. on the day the invoice is due.
Your issuer must also mail you your invoice 21 days before the payment due date. Plus, it should be due on the same date each month, Ulzheimer adds.
“They can’t keep moving it,” he said.
Fact #7: Credit card issuers might pay to keep you.
Fortunately, there may be another alternative. Some issuers may encourage you to keep your card with a retention offer.
When you call your credit card company and say you’re considering canceling the card because you don’t want to pay an annual fee or the rewards no longer work for you, the issuer may offer an incentive to persuade you to keep the card. You can obtain an exemption or a reduction of your annual contribution. You can even receive bonus points or statement credits.
See related: 5 crazy ways to get credit card rewards
Of course, this is not guaranteed. Some issuers are known for their generous retention offers, while others almost never offer them. Additionally, issuers are more likely to try to keep cardholders who regularly spend on the card.
Either way, it doesn’t hurt to call and ask. Make sure you don’t say you’ve already decided to close the card. Just say you’re thinking about it. Alternatively, an agent may simply offer to close the card for you.
The bottom line
There’s more to your credit card than its terms and conditions. The more you learn about credit cards, the better they will serve you. I hope you’ve learned something new from the seven credit card facts we’ve discussed and that you’ll continue to expand your credit knowledge. I’m always here to help you with that!