Tuesday, October 21, 2008

Don't Be Fooled - Even A Credit Won't Save You

One of the more advanced topics in personal finance is the use of credit cards for your own benefit. Some people are involved in applying for credit cards and moving the balances around to get balance transfers. Others are simply using cards that have the best interest rates and reward programs.

Now that I am credit card debt free, I have chosen to continue to use a single credit card because I get rewards on the card which can be used later on for higher-education related expenses. So, this is what I have been doing for the past year or so. Every time I buy essential expenses like gasoline or groceries, I buy them with the credit card and pay the balance each month.

Recently though, I've become aware that credit cards have resumed their dirty tricks and have started moving around the due dates of the statements. This means that inadvertently, you can miss the payment date and be slammed with late fees and extra interest. So, I decided to fight back. I wanted the rewards but I didn't want the risk of being late on a payment. So, I started pre-paying my card by a couple of weeks when I knew I had purchases that were on there.

I was foolish though. Banks, and especially credit cards, always win! This past month, my card had a 93 dollar credit balance in the middle of the month. Less than 5 days later, there was over 100 dollars worth of charges on the card. However, on the date that there was a credit balance, they zeroed it out and cut a check for the credit. Then, the charges hit and now, here I am, wondering whether or not to pay the card.

Now I have to cash the check and send it right back to the credit card company.

1. For me, it makes sense to carry the "credit" balance for a week or two at a time on the credit card. It makes me no money in the bank checking account and I use the card usually 2-3 times a week. There's always new expenses.

2. Obviously, it seems like a ploy by the company to rack up the balance and then charge me late fees and interest when I don't pay enough or don't pay on time.

Moral: Be careful. Carrying a credit won't save you.

1 comment:

lulugal11 said...

The way I manage my cards is not prepay. I pay on the day instead.

I have ING (email me if you need a link to get a new account and a bonus $25) and if I use my card today to buy gas, then when I get home I go into ING and tell it to send a check for that amount. I set the date for a week from today so that by the time the check goes through the mail and the company goes to cash it I have not accrued any interest fees but the card will still be paid.

You might want to try this method instead of waiting until the end of the time to pay the balance in full. Or you can just set it to send a payment every two weeks instead. That way you never have to worry about the statement date changing because the payment will always get there in time. Your payment gets there within two weeks of the charge so if they go to a twenty day billing cycle you still have a grace period.