| Reading the credit card fine print | | |
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In fact, you could get into even more trouble if you
miss a few due dates. "If you miss two payments, or are late
twice, they could automatically raise your rate," says Ray
Hooper, education housing director for the Consumer Credit Counseling
Service of Greater Dallas.
The fine print will warn you which slip-ups could
cause a rate increase.
Payment allocation: If you use your card for
both purchases and cash advances, or use your card both during and
after a promotional period, then chances are you'll carry charges
with two different rates. But if you assume that your payments will
pay off your highest rate first, you're probably in for a disappointment.
Payment allocation tells how they allocate your payment
in the event of differing rates, including how they may be allocating
all payments to the lower rate before paying off the high one. Make
sure you're aware of how payments are allocated and whether you
have the right to request how they should be allocated.
Read the fine print to make sure you know this before
you accept the card.
Over-limit fees, late fees, grace periods:
If the grace period for making payments is stated at 28 days on
the initial offer, then you know when to pay your bill to avoid
a late fee.
But the fine print probably will warn you that the
company can change the grace period. Card issuers can change the
grace period from 28 days to 20 days, let's say, and as long as
it was in the fine print, it's legal.
Also, David Bach, CEO of Finish Rich Inc. and author
of "The Finish Rich Workbook," reports that some companies
have a specific time on the due date that the bill is actually due.
Look for that, too.
"That's a huge trick," says Bach. "If
a bill is due at noon, and someone gets their payment in on the
last day in the afternoon, they're hit with a late fee."
Default purchase rate: By missing payments,
you will start racking up heftier interest rates -- even on other
credit card accounts! Known as a "universal default,"
this urban legend is real. It's just buried within the fine print,
says Watson. "If you miss a payment on one account, a totally
different creditor may well raise your interest rate on that card,
too. It won't work anymore to keep one card current and hope for
the best on the others. Even a card that has never had a delinquency
may now be charging a higher interest rate."
Transaction fees: Fees for various transactions,
like using your card for cash advances. Make sure you consider that
and what sorts of transactions you're most likely to make in selecting
a card.
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