Credit cards can be nasty beasts. Whether you are getting out of debt or using them for their convenience, security, or reward points it’s important to know each card’s exact attributes. Here is a list of 8 things you must know about your credit card.

1. Balance I put this one as number one because, in my opinion, it’s the most important. You simply must know how much you owe. Whether you pay your balance in full or are digging yourself out of a hole. Everything starts with the balance

2. Credit limit You want to make sure you keep your balance under the credit limit. You can’t do that if you don’t now exactly where your limit lies. If your account is over limit the fees will pile up faster than you can say “debt sucks”. Pay down an over limit card as fast as possible, regardless of the interest rate.

3. Interest rates Notice I said rates, with an S. You have more than just the interest rate on your purchases. You might also have a balance transfer rate or a cash rate. Know what each rate is and the balance in each category.

4. Cycle date The cycle date is the date your statement prints. It’s where one statement ends and the next one begins. It’s important to know because most cards calculate the interest based on the average daily balance. This means the earlier you make your payment the lower your average daily balance will be.

5. Due date Obviously you need to know this. It’s the last day you can make your payment and avoid a late fee. You must make your payment sometime between the cycle date and the due date.

6. Default rate and what can trigger it The default rate is a terrible thing. Being late or over limit too much can cause your interest rate to skyrocket. You will probably have to call customer service to find out exactly what triggers the default rate. The terms and conditions will be vague about this point. Take the time to make sure you know what not to do. You will want to avoid those actions at all costs.

7. Payment allocation Remember how different types of balances have different interest rates. Well, when you make a payment the credit card company most likely will pay the balance with the lowest interest rate first. Find out if this is the case, if so ask if there is a way to send a special payment to the balance with the highest interest rate instead. Some companies allow this and some don’t. You will still have to make the minimum payment the regular way, then you can send extra to your specified balance.

8. Know your rewards Are you earning rewards with your card? If you can earn rewards you might as well. Find out what type of rewards you can earn and how to maximize them. Do you earn 5% cash back on gas on one card and 3% on groceries on another. Then use them accordingly. Max out those rewards where you can. But only if you can pay the balances in full and are organized enough to keep track of those due dates.

I almost made a big mistake because of some small print. I am currently in the market for a credit card with a zero percent interest rate for at least a year with no balance transfer fee. When we landscaped the back yard last year we put it on a card that was zero percent until the end of October. Since that is coming to an end soon I’m looking to move it.

Last night I got an offer that said “0% fixed APR on purchases until January 1, 2010 when you transfer a balance now!” Sweet! January 2010 is perfect, and it also said that there was no balance transfer fee if the balance transfer was done within 30 days of opening the card. I was going to apply for this card and move my $7,800 balance over.

Then this morning I was trying to figure out if I had to do the balance transfer with the application, or if I could wait to be approved and then move it over. But while I was reading I noticed that the 0% is only on purchases and is not the balance transfer at all. The balance transfer would be at 8.99% right from the start. Ouch, not what I’m looking for at all.

The big bold print on the front of the offer seemed so great but you really have to make sure you know what you’re getting into when you deal with credit cards. They have some very “creative” offers. If you’re not 100% comfortable with how to read a credit card offer I wrote a post a few months ago for Jonathan over at Master Your Card that gives a section by section explanation.

pic by: KM

Well, I’ve finally entered the world of cash back credit cards. I’ve always thought they were a good idea, but they never seemed like they were worth the hassle. An extra card to carry around, another bill to pay, something else to organize and keep track of, I don’t know… I just never felt the need, but I was glad they worked for other people.

Then I was getting gas a few weeks ago and I’m just standing there watching our hard earned money go down the drain and there was an ad on the pump for the Costco American Express Business card, which gives 5% cash back on gas. I stood there thinking, “Gee if I had that I would be getting like $3 off just this purchase.” So I grabbed an application. It’s a business card, so I used my Ebay business as my business. Sure I only make about $10 a month, but they don’t ask for a Profit and Loss Statement, you know what I’m sayin’?

I just got my card yesterday and I’m very excited. We budget with a envelope type system in Excel. So we figured out a way to keep track of which category we spent the money from and still keep track of what we have spent on the card. I think it should work out.

As well on 5% cash back on gas, this card also gives back 3% at restaurants, 2% on travel, and 1% on everything else. I figure we should earn about $354 a year just on gas and eating out. So I think it’s worth giving it a shot.

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Credit Protection

How to have your late fee reversed

Pic by: ingriogiro

I got my credit card statement the other day and I saw something that made me really mad at myself. No, I didn’t overspend; I realized for the first time that I have their “credit insurance”. It’s called different things with different credit cards but the idea is the same with each. They charge you a small percentage of your balance and say they will pay your minimum payment if you are laid off or become disabled. They will also pay off your entire balance if you die. You are usually signed up automatically when you open a new account. I can’t say it’s a scam exactly but I’m here to tell you it’s pretty hard to actually qualify for the benefits. If you have this on your credit card call and cancel it right away. This service costs about 80 cents for every $1,000 of balance. So for an $8,000 balance you would pay about $6.40.

I’ve mentioned before that I used to work in credit card customer service. I talked to over 100 people a day for two years about their credit card accounts. That means I’ve worked on over 50,000 credit card accounts. Do you know how many people I’ve seen that actually received benefits from the “credit protection”? One. ONE! One person out of 50,000. I’ve worked with dozens of people while they were trying to receive benefits and were eventually denied. I’ve seen lots of accounts go into collections because the cardholder was told they would receive benefits but then never did. But I’ve only seen one person actually receive benefits from this insurance.

Still not convinced? Let’s take a look at the supposed benefits.

· They will make your payment if you are laid off or disabled. This is only for a certain amount of time, usually a year, and it’s only the minimum payment. The minimum payment on a balance of $8,000 is probably about $160. That is less than $2,000 in potential benefits. And your balance didn’t go down very much. At the end of the year you would still owe quite a bit. They didn’t really relieve you of anything.<!–[endif]–>

· They will pay your entire balance if you die. Who cares? You’re dead. If there is another contractually liable person on the account then this benefit doesn’t kick in. If there was not another liable person then there isn’t anyone to collect the money from. No one needs to pay it.

Ok, so hopefully I’ve convinced you that you don’t need this service. When you get your credit card statement this month, take a close look. Make sure you aren’t paying for this service. Credit card debt is hard enough to get out of without having extra charges put on your account every month.

Pic by: Photo Alien

If you make a charge on your credit card and there is a problem with the transaction you can file a dispute with the credit card company. You have 60 days from the posting date to file this dispute. There are several reasons under which you can file a credit card dispute. The most common ones are as follows:

• Services not rendered.
• Item not received.
• Service canceled.
• Item returned.
• Duplicate charge.
• Partial dispute. – you don’t have to dispute the whole charge if you had a problem with only part of your order.