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Secrets about credit cards you must know

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Credit card companies, like any business, have a primary function: making money. And that means they’ll use every legal trick they can think of to get you signed up and paying them interest.

It also means they’re not keen on telling you a lot of things that will bring their profits down and save you money, so we’ve rounded up six facts that you should know and they probably won’t tell you.

1. You can say no to rate hikes

The average interest charged by credit card companies hit a 12-year high last year, despite the Bank of England base rate being at an all-time low.

But did you know that if your lender writes to you to say the rate you pay is rising, you’re legally entitled to simply say “no”.

You then have the option of either paying off the debt there and then, or if you’ve got a godo record of meeting payments on time, you might even be allowed to just keep your card and pay it off at the existing rate.

The length of time you have to contact the lender has increased form 30 days to 60, so if you’ve had your rates raised recently, get in touch with them.

2. You can get rid of additional fees

If you are currently carrying a balance and have a good payment history you may be able to avoid additional fees. These include balance transfer fees, late charges or even annual fees.

If you have a reasonably good relationship with your lender, you have a good argument for getting fees waived. They will not advertise this but in order to keep you from transferring your balance they may oblige.

3. You can lower your APR

You really can reduce your APR by just asking. The rate you are offered depends on a lot of factors, from your situation and credit history to the financial position of the lender. All of these can change.

But if things change for the better, you can be sure they are not going to call you and tell you about it. But if you call them and ask, they might well be able to lower your rate.

The better your payment history and credit score, the better your chances are of getting a lower APR. Make sure you have some low-rate credit card offers in hand when you call. It’s worth a try.

4. They prefer minimum payments

It’s not in the credit card companies’ best interest for you to pay off your card in full at the end of the month because if you do, they receive far less money.

This is part of the reason rewards cards work for them -they may offer cashback and Airmiles but if you don’t pay off the balance you could be paying APRs as high as 22%. You may as well have bought your plane ticket for full price as it would have cost you less in the long run.

Making the minimum payment is exactly what credit card companies want from you, this way you pay interest on your borrowing for the longest time possible.

5. Withdrawing cash is very expensive

Most credit card companies will charge you much higher rates for cash withdrawals rather than purchases — with interest rates on cash often around 30%.

On top of this, you will almost certainly be charged interest from the second you take the money out, sacrificing the normal period of grace until interest is levied.

And on top of this, there may well be a cash withdrawal fee of around 2.5% (with a £2.50 minimum).

Withdrawing cash on credit cards has become outrageously expensive and many borrowers may be unaware of the true cost of these withdrawals.

6. They watch your every move

Each year credit card companies spend millions studying your habits and analysing your spending in order to separate you from your hard earned cash.

They believe that you will spend more on a credit card than when you pay cash because you don’t feel the loss as quickly.

You may think that you are being wise by signing up to rewards schemes but in reality, you may be adding an unnecessary risk to your life.  Before you sign up for a rewards card, figure out what you will need to spend in order to get these incentives.

It is also a good idea to check if the rewards you will receive are offered throughout the year.
Source: Yahoo Finance

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