Posts Tagged ‘credit card’

How to Escape Bank Traps?

October 3rd, 2008 | Author: admin

Waived registration fee. No annual fees. Zero percent interest for the next six months, or even a year. Rewards points. Free airline tickets, hotel stays, car rentals, a variety of great brand-name products. Low teaser rates and other deals sound great, until you find out what you’re really paying – if you find out.Who could resist such a deal?

Well, if you’re smart, maybe you.

Enticing offers like these from your bank or credit-card issuer are increasingly filled with traps that can pile on unexpected fees or trigger punitive interest rates, some as high as 35%. True, the details are spelled out in the fine print of promotions and cardholder agreements. You have to be incredibly diligent to avoid the tripwire.

The strategies that follow will help make sure you don’t get caught.

Trap No. 1


Bait and Switch: The Oldest Trick in the Book

You’re tempted by one of the many low-rate or zero-percent card offers you get in the mail claiming you’re pre-approved for the deal. But the fine print often contains qualifying language that can result in your getting a higher rate than advertised. If you do land the stated rate, you’ll often find that it applies only to balance transfers, not new purchases. Your monthly payments, however, will be applied first to the low-rate balance transfer, helping the new, higher-rate debt to grow. And if you’re late with just one payment, the issuer may well boost your rate on the whole amount outstanding, even though the low rate was supposed to be in effect for six to 12 months.WHAT TO DO The cardinal rule of balance transfers is to take the card transferred to and put it in a dark place where you’ll never be tempted to use it again. Before you apply for a low-rate deal, make sure you understand the terms in the disclosure box and read the fine print to see what can trip you up.

Trap No. 2
Late Payments?: One Strike and You’re Up

You probably know that late payments can prompt your card issuer to increase your interest rate, even of you’re a first time offender. And you may know that some issuers will raise your rate if you’re late paying a bill to a different company altogether – a policy called universal default that is practiced by 45% of banks nationwide.

WHAT TO DO Call and ask your issuer whether it has a universal default policy. If so, consider switching cards. Check your monthly statements carefully to make sure a rate hike hasn’t slipped past you, and read all notices that you’re sent. Some banks, now give a two-weeks warning and let you pay off your balance at the lower rate. The catch: The account will be closed, so you can’t make additional charges on it. If your rate does jump, ask the issuer to lower it. Tell the rep that other banks have made you better offers, which is undoubtedly true.


Trap No. 3
Two-Cycle Billing System: Twice Is Not So Nice

If you carry an occasional balance on your credit card, you may get hit with higher than expected finance charges if your issuer uses a two-cycle billing system vs. the standard one-month cycle. That’s because carrying a balance wipes out the grace period on new purchases, and in a two-cycle billing period, the issuer can impose interest retroactively. Say you charge a P30,000 laptop on Oct. 15 and can’t pay the full balance when you get your bill in November. Under double-cycle billing, you’d be hit with interest based on your average daily balance in October and November, resulting in 50% higher finance charges than if you’d been charged for November alone.WHAT TO DO Check your cardholder agreement to see if you’re subject to two-cycle billing. If you are, and you carry a balance from time to time, switch to an issuer that bills on a single-cycle.
Trap No. 4
The Not So Courteous Service

It sounds like a nice gesture: Your bank automatically covers you if you overdraw your account, saving you the humiliation of a bounced check or a declined debit card. What your bank doesn’t spell out is the hefty cost of this courtesy service per transaction.WHAT TO DO Sign up for overdraft protection linked to a savings account or credit line instead of relying on the default service. Better yet, stop living so close to the edge. The easiest way to avoid overdraft fees? Don’t spend more than you have.

Posted in Business and Finance | Tags: , , | 8 Comments »

Debt Consolidation

August 26th, 2008 | Author: admin

The action of combining several loans or liabilities into one loan. Put another way, debt consolidation is the process of taking out a new loan to pay off a number of other debts. Most people who consolidate their debt are usually doing it to attain a lower interest rate, or the simplicity of a single loan. Also known as a “consolidation loan”.

Notes:
This is common among companies or people with credit problems (maxed-out credit cards, car loans, student loans, etc.), who combine all their debts into one loan to create greater ease in repayment. In the case of credit card debt, this can often be advantageous since credit cards generally carry a high interest rate.

Posted in Business and Finance | Tags: , , , , , , , | No Comments »
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