3 Credit Card company secrets that you shouldn't know

Contrary to popular belief, a credit card is not your free money. It's a piece of plastic that promises to pay your purchases at a later date. Think of it as your loan. Before you get one, it's highly recommended that you establish your own emergency fund first.

Now, I know you probably don't want to hear this, but not all credit-card companies want you to pay your loans as soon as possible. They earn everytime that you delay your payment because of the interest rate. Yes, you dont pay the full interest rate once you settle the minimum amount due but there will still be some finance charges for the remaining balance.

Some people who are granted the opportunity to own a credit card usually wouldn't bother to read the contract through.  If some credit-card companies don't make the effort to disclose the fine print or reveal your privileges, then read up. It's for the good of your sanity and your financial wellness:

1. They need you more than you need them.

Competition in this credit-card market is tough – this is why a lot of them display enticing advertisements and give out lots of freebies, right? This is why you get spam emails on credit-card applications. This is why a well-dressed credit-card representative gives you brochures and even asks for your contact information right on the spot.

That said, if you just do your part and be a great customer, you can negotiate for almost everything!
Yes, you can negotiate your card's annual fee. You can even have it waived.
Yes, you can negotiate a late fee, provided that you've been paying in full and in time every time.
Yes, you can even change your due date to the date of your convenience.

2. The old "loosing a loyal customer" tactic.

You're still your credit-card company's boss. So if you've been a loyal and responsible customer, you can actually call them up and negotiate your current interest rate. You can tell them about your clean track record – you pay in full and in time – and nicely ask them to lower your interest rate.

Hey, you can even tell them about their competition's current rate! You can say that your new card can offer a lower rate and can even give you freebies such as a free Despicable Me! Minion keychain or a free meal at a nice restaurant.

Tell them you'd really like to keep their card, but if they can't offer you better terms, you might be “forced” to switch. It doesn't hurt to try this.

3. The initial offer is not permanent.

Getting a credit card is like getting married. At the early stages, you're so happy and so satisfied with your spouse – everything about him is perfect! His hair, his abs, and even his cute dimple on his cheek. After 6 months has passed, then, boom! You think his hair is dull, his abs are only one-pack, and his cute dimple looks like a worm.

This is the teaser rate that credit card companies give you if you “sign up now.” In the beginning, you'll enjoy low interest rates. After 6 months, when you're already in a fixed contract, they'll increase the interest rate to immense amounts! (Naturally, you can't protest because this is included in the fine print that you never bothered to read because it made your nose bleed).

How do they earn from you?

You're allowed to pay only the minimum charge so that your interest will be maximized.
Let's say you have a balance of P 20,000 on your credit card right now.

You can pay only 1% up to 5% of that, because this range is computed as the minimum payment. Therefore, you can just pay as little as P 200 to P 1000 only.
Good! Deal! You already paid the minumum due so you've paid everything you owe, right?

- Wrong
If you pay only the minimum amount due, the remaining balance will be carried over to the next statement.

So, if you've paid P 1000 right now, you still have a loan of only P 19,000, yes?

- No.
You will also be charged an additional amount which is a percentage depending on the remaining balance.
If you can afford to pay the total balance in full and on time, then go! Enjoy – you can even take advantage of the freebies!

If you can't, then no! You'll get stuck in a difficult debt cycle.

So always think twice before you swipe that credit card.

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