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BANKING & CREDIT -
Credit & Debit Cards (continued)
2. Minimize interest costs charged by credit card companies. Of course, the best way to save on interest costs is to not borrow from your credit card company at all. Since this is easier said than done in many instances, consider the following ideas to minimize the interest you pay to credit card companies.
a. If possible, get more than one credit card. This will give you flexibility with respect to negotiating interest rates on each card, and will also provide more special offers that include lower interest rate borrowing. Just do not fall into the trap of borrowing on all of the cards.
b. Negotiate lower interest rate terms with your credit card company. Just because they have decided to offer you a certain rate on your card for purchases, cash advances, etc. does not mean they will not lower the rate if asked. Many cards will reduce the interest rate in the hope that you will begin using the card or use it more. Try to make any request for a lower interest rate before you have any balances on the card that are incurring interest. Just call up the credit card company and ask them to lower your rates. If you received an offer from the credit card company (or another company) for a new card they are offering that has a lower rate than your card, ask them if they can reduce the rate on your current card to the same level. Or, tell them you would like to use their card more if the rates were lower. You will either get a lower rate, or the company will politely refuse your request saying they cannot make a change at this point. Some studies have shown that over 50% of people who ask for a rate reduction do get one. And if you do not succeed on the first call, try again in a couple of days. You will get a new credit card rep and may have more success.
c. Perhaps the best way to get lower rates from credit card companies is to take
advantage of special deals they have for “balance transfers.” These deals often
come in the mail, but just as often are unadvertised and you only find out about
them by calling up your credit card company and asking. Many of these “balance transfer”
offers will also deposit any money borrowed into your checking account for whatever
use you like, and still charge the special balance transfer interest rate. Most of
the time, if you expect to have the balance borrowed for any period of time, the
fixed rate for the life of the balance is the safest way to go, to avoid having the
rate significantly increased if you do not pay the balance back within the stated
time frame. When comparing the cost of these special deals, make sure to look at
any transaction fees that are charged, in addition to the interest rate charged.
These one-
d. Make sure you pay on time whatever is owed on the credit card, whether it is the full or partial balance, or the monthly minimum payment required. If you are late, at a minimum you will be charged a late fee. If you have a loan balance, especially if it is at a special rate, you may very well trigger an upward revision in your interest rate (sometimes to a very high level). You may also hurt your credit rating which will limit the availability of loans in the future and will increase their cost. However, if you do make a mistake and are late for only a few days, call up the credit card company and ask if they will waive the late fees. Many times they will if this is the first time you are late. They may also waive their right to increase your interest rate one time if you plead your case.
e. If more than one person wants to be able to use the credit card that person can become either an account holder or an authorized user. If they are an account holder, they will be equally responsible for any amounts owed to the credit card company. If they are an authorized user, they will not be responsible to the credit card company for amounts owed. How credit ratings are affected for account holders and authorized users is discussed under the “Credit Ratings & Reports” heading.
f. Make sure you do not go over your limit and get charged a fee or trigger an increase in interest rate. Avoid having automatic bill paying applied to your credit card, or you may forget a monthly charge to your card and it may send you over your limit. But if you are charged an over limit fee, or have an interest rate adjustment, call the credit card company and see if they will remove the charge or not increase the interest rate, especially if this is the first time it has happened.
3. Other ways to reduce the cost of credit cards include:
a. Do not pay an annual fee for your credit card. Many cards today do not charge an annual fee. And while many still do, most often if you call them up and ask them to remove the fee they will. If they do not, you can mention that you have other cards that do not charge a fee. If you have several cards, you can always tell them you will be canceling the card if the fee is not waived, and see what happens.
b. Do not buy credit card insurance. As noted above, at the most, you will only be responsible for up to $50 if your card is lost or stolen and has unauthorized purchases. If only the credit card number is stolen and used for unauthorized purchases, you will not be liable at all. So credit card insurance really does not provide much protection. But check with your credit card company to make sure you understand any risk of loss that you may have.
c. Sometimes, especially for very large purchases, credit cards cost more to use than cash or checks. This is because credit card companies charge vendors a fee to allow their customers to charge their purchases. This fee can be 3% or more of the purchase. When making a large purchase, ask the vendor if they will give you a discount for payment by cash or check. They just might. However, keep in mind, some of the protections discussed above, such as extended warranties, will not be available.
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