Credit Card Traps..And Benefits

Despite the recent Credit Card Bill of Rights, there are still plenty of “tricks and traps” out there to ensnare you.   Jason Cochran, over at Wallet Pop,  has come up with his list of the six common ones.

Let’s Take A Look

The first one is the floating due date.   Frankly, I don’t recall having a card with a fixed due date,  I always assume that they float.   Actually, I believe that the closing date is fixed, and the due date is a fixed number of days beyond the closing date.   In that way, the payment due date will always be a different day of the month and a different day of the week, often on a weekend or holiday.  I suppose there are people who go places without mail service or the Internet for weeks at a time, but I am not one of them.    For me, I get the statement in the mail and I authorize electronic bill payment through my bank for the full balance to be paid no later than the due date.    If I am out of town, I will check my statements online.   This always works, and I don’t have to pay a week before as they recommend.

The next one is called almost a month. I frankly don’t know what he is talking about here.   I have to assume this month rule has something to do with carrying a balance.   Pay on or before  your due date, and you will never have this problem.

His third trap is ing for rewards.   I have talked about this before.  The idea is that people will more, just to get more rewards.    The ultimate satire on this phenomenon was in a movie I once saw where a spoiled teenager was asked if her parents are concerned that she is spending so much on their credit card.   Her response was something along the lines of, “they don’t care, they get frequent flier miles.”    The truth is that people do spend more in some shortsighted attempt to gain rewards.   Keep in mind that he best rewards, if your are lucky, will earn 5 cents on each dollar spent, with 2 cents or less being much more likely.   If you are spending more out of your own pocket to get more rewards, you should cancel your reward card immediately.    On the other hand, if you always volunteer to charge company reimbursed expenses on your card, good for you.

The fourth one is not checking the bill. This is a big one as so many scams these days work by setting up recurring charges on your credit card.    Always look through each charge to see if it is legit.   I actually know people who keep every receipt and match it up with their bill.   I can’t say I actually do that, but every year I find something that shouldn’t be there, just from memory.

The fifth trap is accepting store credit cards.   I have to disagree a little here.  First, he says that opening lots of accounts will hurt your credit.   This is not true.     While too many recent accounts may have a small, short term impact, it is good in the long term to have a low credit utilization ratio.    The way to have that is to have far more available credit than you need.   On the other hand, you should not open up a new store charge every time you a pair of socks.   I know a couple who purchased a house with no appliances.    They opened a store charge at The Home Depot in order to save 10% off several thousand dollars worth of purchases.    This was a wise move that saved them hundreds of dollars.   Other valuable merchant charge cards are reward cards at places you shop very often.

The sixth trap is the minimum payment trap.    By now, everyone should know that paying the minimum payment is about as bad as being an indentured servant or a sharecropper; you will always be struggling to gain freedom from your debt.  This is obvious advice, but it can’t be said often enough.

A Reminder Why Credit Cards Are So Usefull

The “registered traveler” program called Clear shut down this week, leaving it’s customers with a useless piece of plastic in their wallet.    Tens of thousands of people had spent $199  for a card that would allow them to bypass the security line at the airport, yet go through pretty much the same screening as everyone else.      As I said in my personal blog, good riddance.

What do you do if you have already paid the fee for the Clear card?    Unless you paid by credit card, you have virtually no recourse other than a bankruptcy judge.    If you charged this expense to your credit card, you will suffer no loss at all.   Just call your company and ask for a chargeback.   They will likely pro-rate the amount, but that is fair.

Another reminder of how the benefits of using a credit card can outweigh the tricks and traps.