Are You Interested in Your Interest?
Of all of the moving parts within credit cards, maybe no one single aspect is as important as the interest rate. We all know that the lower the interest rate, the better off we are, but most people don’t realize what a single percentage point can mean when you stretch your payments out over a matter of years. It can mean the difference between a few hundred dollars of interest and a few thousand. Here are a few helpful tips in dealing with interest rates on credit card offers.
Don’t miss a payment! – As a matter of fact, it is a very good idea to make your payment as soon as you receive your bill in the mail or online though your e-mail. Why? Many credit card companies have a clause in your contract that lets them crack up your interest rate to astronomical heights if you are even one day late on your payment. Even if they get your payment the very next day in the mail on online through your debit card, they can increase your interest rate several points, or, in some cases, all the way up to the legal limit. That’s why it is so important to pay your credit card bill right away when you get it. And if you can, pay it online through the credit card’s website using your debit card. That way, there is far less processing time and you don’t have to count on the US Postal Service to get that check there by a particular date.
Watch those Intro Rate! – Introductory rates are one of the biggest red herrings in the credit card industry. When you get that gleaming white envelope in the mail with a big 0 or 2 percent interest rate offer, well, most people can’t fill out the application fast enough. But be careful! Some intro rates only last 3 months before the rate spikes to 18 or 20 percent, or sometimes, even higher! What you want, ideally, is a fixed rate below 10 percent for the life of your card, not an intro rate at a ridiculous 0 percent for six months, and then a 15 percent rate after that. We’ve said it before and we’ll say it again, make sure you read the entire application including the disclosure on the back to see what the REAL interest rate is going to be.
Check your envelope! – Many times, credit card companies will raise your interest rate, and the only notification you get is a non-descript white slip of paper with black writing that comes along with your next bill. Most of us ignore it, figuring it is an ad trying to get us to buy something and toss it in the garbage. But wait! That slip of paper could cost you thousands. When a credit card company raises the interest rates on your card, they don’t like to make a big deal out it. They let you know in the quietest way possible. You are always given the option, however, to cancel your card at that moment and freeze in the rate you currently have. You lose the ability to use your card any longer, but you also lock in your current rate forever. Don’t let your card raise your rates without you knowing!
Keeping an eye on your credit card interest rates can seem like a full time job. Rates are constantly going up and down, and we seem inundated by offers for even lower rates. But be careful what you sign up for, it may not be as wonderful as it seems.