Credit Card Tips and Strategies, Issue #006 -- No more late fees?

Credit Card Tips and Strategies Newsletter 006
Date : 16th December 2005

Table of Contents

1. What is Universal Default Clause?
2. New Citi Simplicity Card that waives your late fee
3. Citi Simplicity Rewards Card
4. Rebuild your credit with prepaid credit cards
5. How you can make money refering friends to a credit card?
6. Our top 10 credit cards



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1. What is Univerasal Default Clause?
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Paying your bills on time is vitally important because if you make a late payment on one of your credit cards, you may find that the other credit cards will raise your apr to the default rate. How is this possible you might ask? All your credit card payments are reported to the three major credit bureaus. At the same time, credit card companies are constantly checking your credit scores to potentially offer you more credit cards. If you are late for one credit card payment, all your other credit card issuers will have that information. One late payment on any of your credit card payments will almost surely result in you having to pay a higher apr on your other cards.

Many credit card companies have this "universal default" clause in their terms and conditions. Unfortunately, most people are never aware of them. This is how it looks like :

"We may consider the following factors to determine the default rate: the length of time your Account has been open; the existence, seriousness and timing of defaults; other indications of your Account usage and performance; and information about your other relationships with us, any of our related companies or from consumer credit reports."

If fact, even if a credit card issuer does not have these terms on their terms and conditions, they still can and will apply default rates if you make a late payment on any other credit cards.

What is the best preventive measure against this? Well, simply pay your bills on time. Better yet, enroll in automatic payment scheme if your credit card issuer has this scheme. Basically, you are allowing them to debit from your bank account for your monthly payments. You can choose either to pay in full, only the minimum balance or a fixed amount. If you are set up for automatic payment, you can never be accused of late payment.

You can also set up automatic payments from your bank account to pay the credit card company. This is just the opposite of the earlier method. The only disadvantage of setting up automatic payment with your bank rather than the credit card issuer is that it will probably take an extra two days for the bank transfer to get to the credit card company. Hence, you will end up having to pay a couple of days earlier.

For those who insist on either manually paying your bills online or by check, subscribe to email alerts from the credit card issuer so that you will get your bills earlier in your email box and also reminders of due dates. Check your statements online regularly.


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2. New Citi Simplicity Card with late fee waiver
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I have thought that Citibank is perhaps the most innovative credit card issuer and once again, they have come up with something novel. They have introduced a new range of "Simplicity" credit cards with a very cool credit card design. But what is unique about them is that they will waive any late fees if you have made either a purchase or cash advance during the same billing period.

The Citi Simplicity Card is a basic credit card with the "late waiver fee" feature and also has a very low apr and an excellent 0% introductory apr offer. There is no annual fee and the apr is very low. You also get a 0% apr for 12 months for both purchases and balance transfer. The 0% apr rate on purchases starts from the date of opening. However, for the 0% apr rate on balance transfers starts from the date of the first transfer. Furthermore, you have until 12 months from the date of account opening to do the first transfer. There is also no balance transfer fee for the introductory balance transfer offer.

In fact, even without the "late fee waiver" feature, we recommend the Citi Simplicity Card to those looking for a low apr credit card or those looking for a 0% apr credit card to transfer a balance.

You can read our in-depth review here :

Review of the Citi Simplicity Card

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3. Citi Simplicity Rewards Card
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Citi Simplicity also also has a reward credit card version called the Citi Simplicity Rewards Card. The reward program is based on Citi's ThankYou Redemptions Network reward program.

With the reward version, you earn one point for every dollar you spend on the card. For the first year, you can earn five points for every dollar you spend at standalone gas stations and drugstores. You can earn up to 75,000 points in one calender year. Like the basic Citi Simplicity Card, you also get a 0% apr on balance transfers for 12 months. But there is no 0% apr offer for purchases.

The Citi Simplicity Rewards Card is not as good as Citi's Diamond Preferred Rewards Card in that the latter allows you to earn 5 points for every dollar you spend on not just gas stations and drugstores, but also at standalone supermarkets. Also, you always earn 5 points on these "everyday purchases" whereas the Citi Simplicity Rewards only lets you earn 5 points during the first year.

If you never have any problems with late payments, then the Citi Diamond Preferred Rewards Card will probably make a better reward card. However, if the "late waiver fee" feature is important to you, then the Citi Simplicity Card is probably something you should look at.

You can read our in-depth review here :

Review of the Citi Simplicity Rewards Card

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4. Rebuild your credit with prepaid credit cards
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Prepaid credit cards are most used like a bank debit card. You are not extended credit and can only spend what you have loaded into your card. Because of the very nature of these cards, (which do not extend you credit), you can never build or rebuild your credit history with most prepaid credit cards.

They are also always marketed as guaranteed approval cards, which is very tempting to those with poor credit. However, if you need to build or rebuild your credit, you would have to look for a prepaid credit card with a service called "Credit Builder". Essentially, this service helps you to rebuild your credit. This is how it works. You pay a monthly fee (about $29.95 of which $10.00 in loaded back into the card), which is reported to the three major credit bureaus as an interest payment. You have to subscribe to the credit builder service for 12 months. These monthly fees are automatically debited from your bank account so you will always make payments on time. Within this period, you should have improved your credit scores and get offers for regular credit cards.

The disadvantage of building your credit this way is that you have to pay this monthly fee. If you have a regular credit card, you do not have to pay any fees as your monthly payments and credit card activities are reported to the credit bureaus. However, those who have gotten into financial difficulties in the past because of overspending may want to consider a prepaid credit card with credit builder service.

We have written a report comparing prepaid credit cards with Credit Builder service. You can read our report here :

Prepaid Credit Cards with Credit Builder




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5. How to make money refering friends to a credit card?
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Not only are there prepaid credit cards that help you build your credit, there are also prepaid cards that lets you earn money by refering your friends and family to be a cardholder. Comparing these cards would take up too much space here, but you can look at this report we have written about these type of cards :

Prepaid Cards which allows you to earn referal fees

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6. Our Top 10 Credit Cards
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Time flies as we are come to the end of 2005. I have compiled a list of the 10 most popular credit cards on our website. These are the top 10 credit cards that our readers and surfers are applying from our website. It is not a list of what we think are the best credit cards, just what people are looking for.

Here is our list of Top 10 credit cards :

Top 10 Credit Cards


Before I end, I would like to wish you Happy Holidays, Merry Christmas and a Happy New Year. I look forward to writing our next newsletter in 2006.

Nick Lian
Ask Mr Credit Card