This week I’m sharing a reminder of some basic things to always keep in mind when managing your credit card. It’s the basic things that we sometimes overlook that sometimes cost us the most. Let’s pledge to keep each other informed and grounded. We’re in this to win it!
- Minimum fee NOT paid is rolled over and added to next month’s minimum amount. I can’t over emphasize that you must pay at least the minimum amount due each payment period. If you miss your minimum payment, not only will interest and late fees be charged, your next month’s minimum payment will be at least twice as much because the unpaid minimum payment will be added to the next minimum payment amount making even harder to pay. So do whatever you must to avoid compounding debt and interest.
- Cashback is not a payment. Don’t make the mistake of assuming that cash back credited to your card is recorded as a payment. Some issuers allow you to apply cash back as payment but don’t assume it will be credited as such unless you specifically request it. Make sure you inquire so you aren’t left holding late payment fees or interest charges.
You and your supplementary card holder share the same limit. Be clear about the limit you have been assigned, if you add an additional cardholder, this person isn’t usually extended extra credit, the limit you were assigned is what the additional cardholder will access. So, again, be careful of how you spend and ensure you communicate so both persons are aware of the balance and each person’s responsibility in managing the card.
- You may limit the amount your supplementary cardholder can use. If you want to control how much your additional cardholder uses, an easy fix is to give them a smaller limit. All you need to do is advise your issuer that your additional cardholder should not have access to the full limit and let them know what portion of your limit you would like them to be able to access. (Notice how I interchange the use of additional cardholder and supplementary cardholder? They mean the same thing.)
- Your supplementary cardholder also earns reward points that are combined with yours for even more rewards, faster. Just a reminder that compounding can also be good. Two persons using a card are more likely to reach a great rewards level than one. One of the negatives about earning reward points is that most times you have to earn minimum amounts to qualify for rewards. Some persons may not qualify if they don’t use their card enough. With two persons’ transactions adding up, you are more likely to earn some meaningful rewards.
Don’t take cash advances or use credit card cheques (checks) unless you absolutely must. You cannot escape interest charges and fees on cash transactions on a credit card. While you can avoid interest if you pay off your transaction charges each month, cash advance charges will surely be applied if you take cash from your card, regardless of how quickly you pay back. Get a loan if you have to, credit card interest rates are way too high to be taking cash advances.
- Most issuers will approve transactions that take you a little over your limit. Be careful this could lead to over-limit fees. Issuers will allow this discretionary overage amount to allow you to make purchases that take you just a little over your limit. This helps in preventing the embarrassment of a declined transaction if you haven’t been keeping track of usage and also if you really just need a few extra dollars.
- You will pay interest if you take a Payment Holiday. These can give you time to take a breather if your finances are in a bad place, but know that you can’t escape interest when you return from a payment holiday. A payment holiday can give you a breather by allowing you to skip a month’s payment without penalties. Be aware that these penalties do NOT include the interest incurred. Late fees will be waived but you shall surely be charged interest if you take a payment holiday. Make sure you know what interest will be charged after the holiday if you choose to take it. You issuer has a responsibility to keep you aware, so ensure you ask if the information is not provided up front.
- Chip cards are designed to be safer. Most payment systems (Visa, MasterCard, etc) have mandated that issuers and acquirers (the businesses that provide the credit card machines) upgrade to issue and accept cards with chips instead of only the traditional magnetic stripe. The chip allows your information to be ecrypted and is harder for fraudsters to duplicate. Also chip cards usually allow for the use of a PIN as an additional layer of security. Check with your issuer if you still don’t have a chip card.
You can get free car rental insurance. Some cards (entry level cards don’t usually have many extras) offer free insurances including card rental insurance. This means that you can avoid paying the extra insurance charges that car rental companies charge if your card has built in coverage for your rental insurance. Check with your issuer to see if you can save some more money when you travel.
- If you pay only the minimum due, you will pay interest on the total used. Again, just a reminder. You knew that, right? The interest is already calculated when you get your statement, so paying anything less than the full amount of your statement amount will mean that all the interest accrued will be charged.
- Always check the details on your statement. Preferably, ensure you use online banking frequently check items on your card. You must check your statement frequently to help prevent fraud. Also, sometimes simple technological glitches can lead to duplicated transactions that the merchant may not even be aware of. Make it your duty to be alert for charges that shouldn’t be on your bill. Read more reasons why you should have online banking.
I hope you are even more empowered and are ready to go out and #spendsavvy.
As always, please give me your feedback and let me know what you’d like to hear about.