You had good intentions when you opened up that new credit account. After all, a good line of credit can improve your credit, help you acquire needed items, and give you extra money in an emergency. These are all good ideas, but somewhere along the way, things go wrong.
Maybe you were laid off, you missed a payment, or some other catastrophe hit, and now you’re so far behind you could never reasonably catch up. Credit card companies don’t help these situations with unexpected fees and changing terms every time you make a mistake. You can avoid incurring fees and other problems with your credit card company by reading the fine print on your contract.
Billing and Payments
Some of the potential pitfalls of credit cards lie in billing and payment practices. Read the fine print very carefully to determine exactly when your due date is, and what the penalty for missing it would be. Even paying your payment on the scheduled due date can be risky, because credit card companies can specify a time of day, such as 9 am or noon, that it must be in by, or you’re subject to penalties.
Some companies also institute a double billing cycle, where the due date for your minimum payment, and the due date for a payment in full are different. If you miss this information and pay the full balance on the minimum payment due date, you could be considered late and incur fees and penalties. There are also fees and penalties associated with paying your minimum balance outside of the grace period, which is subject to change at any time.
Payment allocation is an important section of your contract you need to pay close attention to, as well. There’s usually a different interest rate associated with purchases and cash advances on your card. The credit card company may specify that all payments made go directly to the portion of your balance with the lower interest rate, allowing the other portion to continue to grow without ever being paid down. Some companies allow you to specify where you would like your payments to go, but some don’t.
A Monthly Chore
Making payments on time and staying under your limits are not the only things you need to do to keep up with your credit card. You also need to read through all of the material that comes to you in the mail each month from your credit card company, including the fine print.
Terms are subject to change at any time, so you need to make sure that nothing has changed since last month. Keeping your balance at a manageable level gives you the freedom to cancel the account by paying it off or moving to a new card if the terms change in an unfavorable way.