Common Credit Card Myths
One of the problems dealing with credit cards is people don’t fully understand them. Below are some common misconceptions that can trap the unwary.
Myth: “As long as I make my credit card payment, the interest rate won’t change.”
Reality: That’s not necessarily so. More card issuers are adopting “universal default” clauses that let them jack up rates even if you stay current on your payment. Falling credit scores, missed payments to other creditors, bounced checks and spending above the card’s limit all are factors that can trigger higher rates.
“(Banks) can increase the rate if you’re messing up elsewhere,” said Mike Sullivan, director of education at Take Charge America, a Phoenix debt counseling firm.
Myth: “Card issuers need my consent to change key terms.”
Reality: Card companies can make unilateral changes with 15 days’ notice. Even finance companies offering supposedly fixed-rate cards can boost rates, impose new penalties and alter other terms.
Myth: “Interest rates on credit cards stay the same for people who pay their bills promptly.”
Reality: Rates can and often do change on variable- and fixed-rate cards. Both are driven by the prime rate, which has been rising for the past year.
“Having a fixed-rate card is not the same as having a fixed-rate mortgage,” said Greg McBride, senior financial analyst at Bankrate.com.
Myth: “It’s important to report lost cards immediately to minimize financial liability.”
Reality: It is wise to report missing cards promptly, but you won’t face unlimited losses. Credit card holders are on the hook for, at most, $50.
With debit cards, it’s different. You could lose all the money in your account, plus overdraft protection, if a loss or theft goes unreported.
Myth: “The federal government caps the amount of interest that can be charged on credit cards.”
Reality: Uncle Sam doesn’t regulate card rates.
All content is presented to you courtesy of The Desert Sun.
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Myth: “As long as I make my credit card payment, the interest rate won’t change.”
Reality: That’s not necessarily so. More card issuers are adopting “universal default” clauses that let them jack up rates even if you stay current on your payment. Falling credit scores, missed payments to other creditors, bounced checks and spending above the card’s limit all are factors that can trigger higher rates.
“(Banks) can increase the rate if you’re messing up elsewhere,” said Mike Sullivan, director of education at Take Charge America, a Phoenix debt counseling firm.
Myth: “Card issuers need my consent to change key terms.”
Reality: Card companies can make unilateral changes with 15 days’ notice. Even finance companies offering supposedly fixed-rate cards can boost rates, impose new penalties and alter other terms.
Myth: “Interest rates on credit cards stay the same for people who pay their bills promptly.”
Reality: Rates can and often do change on variable- and fixed-rate cards. Both are driven by the prime rate, which has been rising for the past year.
“Having a fixed-rate card is not the same as having a fixed-rate mortgage,” said Greg McBride, senior financial analyst at Bankrate.com.
Myth: “It’s important to report lost cards immediately to minimize financial liability.”
Reality: It is wise to report missing cards promptly, but you won’t face unlimited losses. Credit card holders are on the hook for, at most, $50.
With debit cards, it’s different. You could lose all the money in your account, plus overdraft protection, if a loss or theft goes unreported.
Myth: “The federal government caps the amount of interest that can be charged on credit cards.”
Reality: Uncle Sam doesn’t regulate card rates.
All content is presented to you courtesy of The Desert Sun.
2 Comments:
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Look over any late fees or over limit charges so that you understand the consequences should you fall behind. The best way to establish and keep good credit is to be an informed consumer.ATT Credit Card
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