By Debbie Dragon

It turns out, your credit card company may not always have your best interests in mind when signing you up for one of their cards. Check out some of the ways you can lessen your interest payments and avoid other unnecessary penalties that lurk in the fine print.

1. Shrinking or Non-Existent Grace Periods
It used to be you could make purchases on credit cards interest-free if they were repaid within the 30 day grace period. Many credit cards have shortened the grace period to 20 or 25 days, and some have even eliminated the grace period all together. Credit cards without a grace period start charging interest on purchases from the day you make the purchase.

If you intend to make purchases on your credit card and pay it off before the interest is charged, make sure you know how many days are in your card grace period so you aren’t surprised to learn you are using a card without a grace period!

2. Fixed Interest Rate Cards Can Be Increased
If you have a credit card with a fixed interest rate, it does not mean the card company cannot increase your interest rate. It just means you are offered the interest rate on all purchases until the company decides to change the rate! Even fixed rate credit cards can increase their rates, as long as they give cardholders 15 days’ notice of the rate change.

To avoid a surprise increase to your fixed rate credit card, always open and read the mail from your credit card company. Rate changes usually come in a thin, plain white envelope.
3. Two Possible Penalties on a Single Late Payment
In 2009, the Card Act was passed to help consumers better understand their credit card fees. The act put a limit on the amount credit card companies could charge for a late payment, but there are no concrete maximums for penalty rates. If you make a late payment, there are two types of penalties a credit card company can charge:

Late Payment Fee:  this is a one-time fee that can be as much as $35.
Penalty Rate: this is a change to your interest rate that may happen if you are 60 days late making a credit card payment. The penalty rate is the new interest rate charged on your existing credit card balance and on all new purchases.

The Card Act of 2009 requires that card companies review accounts and remove penalty rates after an individual makes payments on time for six consecutive months. For most credit cards the penalty APR is 29.99%.

4. Penalty Rates Can Extend to All of Your Credit Cards
What you may not realize is that making a late payment on one of your credit cards can also result in getting a penalty rate on your other credit cards -- even if you have been making the payments on time for all the other cards!

A simple mistake can end up costing you a lot of money in higher interest if you carry a balance on your credit cards. Be sure to log into your accounts regularly to see if you are suddenly being charged a higher interest rate.

5. Balance Transfer Checks Can Cost You More
If you receive checks in the mail from your credit card company, don’t start writing checks to pay your bills thinking you will consolidate everything onto the one account to save money and time. Many balance transfer checks are going to charge you a fee of three to five percent of the amount you make the check out for.

So even if the interest rate on your credit card is lower than the rate you’re paying on the other account, the fee will often negate any savings.

If you find yourself paying excessively high interest rates, it may help to negotiate a lower rate or take advantage of a balance transfer credit card offer to help you tackle your debt.

MyBankTracker is an independent resource that helps consumers make smarter banking and money decisions.

Related Articles
  1. Personal Finance

    The Ten Commandments of Personal Finance

    Here are the simple financial Ten Commandments that, when faithfully followed, can lead to a secure economic future.
  2. Credit & Loans

    Should I Use My IRA to Pay Off My Credit Cards?

    Cashing in an IRA to deal with outstanding credit card balances may not be the best way, but sometimes it's the best available way. Here's how.
  3. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  4. Credit & Loans

    Walmart MoneyCard Vs. Walmart Credit Card

    Discover how the Walmart MoneyCard and the Walmart credit card have different benefits that may influence your decision on which one to choose.
  5. Savings

    These 10 Habits Will Help You Reach Financial Freedom

    Learn 10 key habits for achieving financial freedom, including smart budgeting, staying abreast of new tax deductions and the importance of proper maintenance.
  6. Credit & Loans

    Have Bad Credit? 6 Ways to a Personal Loan Anyway

    It'll cost you more, but borrowing is definitely doable. Here's how to proceed.
  7. Credit & Loans

    How To Minimize Holiday Debt Before It Happens

    Holiday expenses can drown you in debt. Find out how to avoid this festive spending hangover.
  8. Credit & Loans

    These Are The Best Credit Cards For Making Balance Transfers

    Handled correctly – and very carefully – a promotional credit card balance transfer offer can save you money. Here are some of the best deals around now.
  9. Investing

    How to Raise Your Credit Score Quickly

    Here are the best tips for raising your credit score quickly.
  10. Credit & Loans

    Getting Your Name Off A Cosigned Loan

    If you want to remove your name from someone else’s loan, there are four key ways to do it.
  1. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reducing the number of times shoppers and buyers have to pay for ... Read Full Answer >>
  2. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>
  3. How can you cancel your Walmart credit card?

    Walmart offers two types of credit cards: the Walmart MasterCard and the Walmart credit card. How to Close Your Walmart Credit ... Read Full Answer >>
  4. Do free credit reports affect your credit score?

    Free credit reports do not impact your credit score. Credit inquiries are divided into two categories: soft inquiries and ... Read Full Answer >>
  5. Does a free credit report show your credit score?

    The free credit reports available from the three credit reporting agencies do not include your credit score. Under the 2 ... Read Full Answer >>
  6. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>

You May Also Like

Trading Center