Nothing feels better than a fresh start, and nothing heralds that like the New Year. January is a blockbuster month for popular resolution mainstays such as fitness gyms, diet plans, educational resources, and yes – financial planning gurus. Are these good ideas? Of course - anything you can do to help manage your life and overall well being should be undertaken with enthusiasm. But what about an area you feel you already have a handle on?
If what we hear is true, then almost everyone over the age of 18, and many who aren’t, has or is using a credit card. While we won’t debate the value of having and using plastic on a regular basis, it is fast becoming common knowledge that the credit companies may not be as benevolent as we might have originally believed in their rush to make sure that every American has at least three cards in their wallet.
While I think most of us are familiar with the rudimentary features of having a credit card and the hazards that are inherent in their use, it doesn’t hurt to ask the following:
n Is your awesome “fixed” rate out the window if you make one late payment - even if it is to another creditor?
n How long is your phenomenally low APR good for?
n What does your APR change to after the introductory period?
n What kind of grace period does the card allow?
n Do you feel that $35 to $45 is an excessive amount for late and over-the-limit fees?
If you are one of the fortunate few who has their financial house in order, are already at their target weight, have conquered the issue of creating a work-life balance, and feel that your portfolio is right on track for your early retirement, let us share a few interesting tidbits that just may have gotten past you. Don’t let 2005 brings you a surprise that you might not be ready for.
n Billing address - Credit card companies sometimes change their payment P.O. Box. If you send your payment to the wrong one, it is almost guaranteed to take awhile to get to the “right” place. That means you're responsible for the late fee and your interest rate could be raised. To avoid this always use the envelope provided in your statement.
n Write neatly! Credit card companies are legally allowed to hold for five days and re-route all "illegible" payments to another department, making your payment "late" before it’s posted.
n Cash advance fees and rates –Basically don't take cash out of your credit card. Aside from paying a high rate on the cash you take out, you're going to pay a fee, usually 2 percent to 4 percent of the amount advanced. In addition to interest if you fail to pay your balance in full (which by the way, starts to accrue immediately), or if the amount puts you over the limit.
n Credit card theft insurance – Pass. You don't need theft insurance for your credit card. If it's stolen, you are only liable for $50, at most.
n Balance-transfer fees - Before transferring a balance ask if there is a fee and ask how long the low rate lasts. Most rates are good for six months. If you are late on one payment, the low rate is immediately replaced with a much higher rate. Be careful that the transfer doesn’t put you over your credit limit, again – another fee situation.
n Inactivity charges - Credit card companies don't make money if you don't use your cards. Some companies charge as much as $15 if you haven't swiped your card in six months.
n Mandatory arbitration – In many cases you have agreed to this if you have the card. If you have an issue, be sure to document!
n Charging abroad - In addition to the 1 percent currency exchange fee on Visa and MasterCard, some major banks are charging a 2 percent fee on credit card and debit card purchases made outside the United States. This certainly adds to the vacation budget.
Take charge of your cards in the new year, and gain control of your finances!
