Tuesday, January 8, 2013

How NOT to Use Your Credit Card

Credit Card
Credit Card (Photo credit: 401(K) 2013)
Credit card flyers that come in the mail have a specific purpose. They are aimed to secure credit worthy individuals to apply for their product, a credit card. From each transaction the consumer completes, the card company is paid a fee by the provider. 

But, credit cards have other ways to make money and the biggest revenue stream is you, the card user. There are a number of ways that credit card companies use to make you a productive profit center. You must remember that credit cards are not issued by generous companies looking to help you out. Credit cards are issued to reap profits.

The agreement between a credit card provider and a credit card user is a contract. You will be encouraged to read the agreement or contract thoroughly. The card issuer does not care if you do. In many cases, it is in the issuer’s best interest that you not read the details accompanying your credit line.

In truth, once you sign the contract, you are indebted. That means that you have to use the card to keep the credit line open. That is fine as long as you really understand what the credit card issuer expects or demands of you.

According to Yahoo Finance, there are numerous pitfalls that credit card companies expect will ensnare users. Once you have read the credit provider’s terms of use or contract, you will be required to sign the document before the card can be issued. Don’t be surprised if the card’s contract looks cumbersome and difficult to read, much less comprehend. This is a symptom if the industry.

Below are pointers that Yahoo Finance and other consumer protection agencies suggest you avoid.

Protect Your Card – The convenience of a credit card is undeniable. They are easy to use and unburden you from having to carry cash. However, physically losing a credit card can cause a loss of time and many headaches beyond belief. Keep you card in a safe place and always know where it is. If you should lose the card, immediately call the provider, explain your dilemma and suspend or terminate the card.

Non-Guaranteed Rates – Don’t be fooled by 0 percent interest rates or seductively low interest rates. While that possibility may have lured you to the provider, realize that those rates are for a select group of users with outstanding credit. If you do get a good rate, there will be specific dates or events that can trigger the rate increase and penalties. Penalties and late fees are where credit card companies reap the biggest profits.

Preferential Cards – Credit card lenders have designed alluring Gold, Silver and Platinum themes that are for “elite” users. Don’t be swayed by the flattering offer. A credit card is a credit card and all cards should be evaluated on their merits; including Rewards, Interest Rates and other terms.

The Sign-up Promotion – Without doubt, you will receive many special credit card promotions this year. Watch out for offers to transfer credit card balances to another provider. These offers either offer a high transfer fee or an interest rate that will keep raising the bar. If the offer is too good, it probably is just that. Read the fine print.

Not Quite Pre-Approved – Advertisements that arrive with the “pre-approved” label are misleading. You can assume that pre-approved means that the provider has your name and address and might consider issuing you credit. You will go through the same application process as every other provider will require.

Identify Rewards – Rewards are a dicey subject. Credit card companies often make misleading promises regarding Rewards for Usage incentives. Be sure that you understand all the terms of the Rewards offering before you apply for the card.

Credit cards are a way of life. If you understand your obligations to the provider, you are in a good place. The convenience of a credit card is undeniable. If you can pay your full balance before the due date, a credit card can be your best friend.

Author Bio:

This article was contributed to 50 Plus Finance by Mark Scott. He writes for SwiftMoney which provides payday loans UK and he loves sharing his insights on various online publications. You can find more details about Swiftmoney on Google+

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