Credit Card Secrets Banks will not tell you

Make no mistake about it, banks do not issue credit cards as an act of philanthropy, they issue credit cards to make money. How banks make money using secret tactics, however, may just surprise you. Being money smart today means more than merely being smart with your money.

1.    Raising interest rates
Banks can raise interest rates whenever the mood strikes them. What you might not know, however, is that this interest rate hike can be retroactive. In other words, if the bank decides to raise your APR from 18 to 24 percent on the 15th of the month, they can backdate that rate to the first of the month, meaning you pay more if you carry a balance.

2.    Changing the billing cycles
Banks can change up billing cycles and grace periods as often as they modify current interest rates or annual fees. Some credit card issuers will have two cycle billing periods, meaning that you pay twice as much APR when all is said and done.

3.    Right to change anything
Because the bank is the credit grantor on a revolving line of credit, they retain the right to change, modify or alter any portion of the contract, as long as they let you know that they are going to do it in advance. This might make you think twice about keeping a wallet full of plastic.

4.    The real grace period
Conventional wisdom tells you that most credit card grace periods are 30 days long (a full billing cycle), however, conventional wisdom is wrong. Billing cycles can vary, anywhere from 20, 25 or 30 days, depending on the bank’s preference. In other words, if you have a balance on your card that you pay off on the 30th, but the bank has a 20 day grace period, you still wind up paying five full days worth of interest on your balance.

5.    What you miss if you don’t read the fine print
Bankers work on commission. They want you to sign up for more programs and services, but they do not always readily disclose the details hidden in the fine print. It is your responsibility to be an informed consumer and read the terms and conditions of every offer presented to you before signing off on it.

Even in the face of all of this negativity, do not cut up your credit cards just yet. If you know your bank’s terms and if you stay up to date with any changes, credit cards remain a useful financial tool. As long as you stay on top of your money, your money (and your credit cards) will never get on top of you.