Carrying a credit card is something many consumers choose to do. Not only does it help you create a credit history, but it also allows you some control of your financial life. Using a credit card wisely can help consumers build a positive credit history by always paying the balance in full or keeping the revolving balance at or below 30% of the available credit, by always paying on time, and by using the card only to make purchases you can afford to pay off. Credit cards are useful, and they make travel much easier. While hotels accept debit cards at check-in, they place a hold on your bank account that makes it impossible for consumers to use those funds until the hold clears following check out. Many car rental companies will not rent to consumers without a major credit card on file. Your credit card is helpful to your financial life, but there are a few things you must know if you want to use it correctly to your advantage.
The Double Billing Cycle
Most consumers believe their credit card account comes with one billing cycle per month. This means your card cycle lasts anywhere from 28 to 31 days, which is a solid month depending on the time of year. You have all the time during the billing cycle to pay off the balance of your card before any interest accrues. This helps keep your credit utilization low, and it prevents you from paying interest on any balances you pay in full before the end of the billing cycle.
What you don’t know is many card companies have a double billing cycle. Read your contract to see if there is a grace period associated with your payment. For example, if you have a payment due date each month of the tenth, see if there is a grace period that allows you to make that payment up to so many days late without recourse. Most credit card companies do not have this, which means you’re subject to a double billing cycle and exorbitant fees.
Advance Change Notice
There is a CARD act that protects consumers from creditors. The purpose of this act is to keep consumers from being exploited by their company with sudden rate hikes and increases, and it demands creditors provide at least 45 days advance notice to consumers if rates are changing and policies are being redirected to a new contract. This is to keep consumers in the know and protect their rights by not springing this notice on them without time to act. The problem is many consumers ignore this notification or never notice it at all, which results in the lack of a dispute and a subsequent rate hike.
This notice has a date before which any action is required. The notice is now sent so far in advance most consumers see it, realize they have time to dispute it, and promptly forget it exists. The date for action passes without fanfare and rates are raised. It’s a problem that the CARD act does not handle accordingly.
Students are Targets
This new CARD act also works to protect student consumers, but it does not. With so many students unable to correctly or responsibly use a credit card, the act is designed to stop card companies from issuing cards to students. This is to protect them from running up credit and destroying their financial lives before they have an idea of how to correctly begin using their credit profile.
Now card companies send their applications to the parents of students, but they only mail them during Christmas holidays, other long breaks, and summer vacations. This means students get the offers addressed to their parents regarding them, fill out the application, and have the credit they want. It’s not protecting them at all.
Handling credit correctly can help your financial future significantly. Check your credit score every few months, have all mistakes on your credit report corrected immediately, and never run up your credit by using your entire available credit limit. You do have rights, and you can work on keeping your credit profile and history positive by putting forth the effort to make good financial decisions.