Universal Default

You may notice that if you miss a payment by even a few days with one credit card account, your other credit cards will revert to a default rate. This is what’s termed ‘Universal Default’ and some credit card companies use it to trap you into higher interest rates. After all, it’s almost certain that you’ll be a little late at some point, and this allows the credit card company to make a bigger profit, even if you aren’t late making payments to their company in particular.

Unfortunately, the only thing you can do to avoid universal default if it is a part of your credit card agreement is to pay all of your credit card bills on time, every time. A better bet is to look for a card that doesn’t have this stipulation in the agreement, and transfer your balances there.

Interest on Late/Overlimit Fees

Some people do not realize that if you are charged a late fee, interest accrues on the fee as if you made a purchase. This essentially means that you are charged more for each time you go over your limit or are late on your payments – and the interest continues to build month to month, so that it becomes more difficult to keep your balances down and avoid more fees and damaging notations to your credit report.

Double Cycle Billing

Double cycle billing is another financial ploy that many credit card holders do not realize is working against them. Essentially, double cycle billing charges interest twice on the same purchases, if you make a partial payment to bring down the balance without paying it off entirely. For example, if you had a zero balance on your card and you made a purchase of $1000 dollars, paying $400 when the bill was due should mean that you would only have interest charges on the $600 that’s left on your bill. This is true with cards that use conventional billing. However, with double cycle billing, you would actually have interest on $1600 the next month. The initial interest would be charged to the $1000 purchase you made, and then additional interest on the $600 balance remaining on the card.

This is another of those instances when it pays to shop around and read the fine print. Be certain your grace period for purchases is spelled out, and if not that the actual interest charges are not double-billed.

“Courtesy” Overdraft

Many times, credit card companies will allow you to keep charging on your card, even if you are over the limit. This means that if you don’t keep a close eye on your balances, you could be charging up a fortune in overdraft fees. While this type of ’service’ is usually called a ‘courtesy’ overdraft, it is actually a disservice that hurts your credit score and makes it difficult for you to obtain more credit, as well as making it difficult to pay off what you already owe.

One of the easiest ways to avoid courtesy overdraft is to set up a reminder that will alert you when you are nearing your credit card limit. Be sure to set the alert at a reasonable amount: $100 to $200 left on your card should give you plenty of notice so that you don’t overspend unknowingly.

If you pay careful attention to the terms on your cards, and plan your credit card purchases accordingly, you can avoid falling into the traps that credit card companies set in order to take more of your money each month. Shop around for fair cards that don’t use deceptive billing practices and you’ll be well on your way to avoiding woes due to fine print.

Related posts:

1. Double Billing Cycles: Is Your Credit Card Company Charging You for Paid Balances? It’s common knowledge that paying down your credit card balances...
2. Credit Card Agreements – Understanding the Fine Print With the passage of the Credit Card Holders’ Bill of...
3. Credit Cards, Credit Crisis, and Your Credit Score Credit card companies are switching tactics due to the credit...

Related posts brought to you by Yet Another Related Posts Plugin.

And it isn’t just pay-by-phone options that can cost you. Some utility companies charge fees when you use credit cards to pay, and if you cannot pay off the credit card in full each month, you are effectively paying interest on fees charged to pay a bill, not even the bill itself, which is a definite waste of money that could otherwise be used to help balance your budget, increase your savings, or even add to an investment.

So how best to avoid these types of fees when you’re trying to repair your credit and pay bills on time? The easiest way is the old way – write a check, be sure that you mail it in time for it to arrive well before the due date of the bill. However, for many people who are living paycheck to paycheck, this may not be an option at first. Another method that can work just as well is to set up automatic bill pay through your bank. Because many banks offer bill pay for free when you have a checking account with direct deposit, it can be simple to ensure that your bills are paid on time without having to pay additional ‘convenience fees’.

Another way to avoid fees when paying your bills is to enroll in automatic payment. If you know you won’t have the money available before the due date in order to mail a check, but will have the money available on the due date itself, you can oftentimes set up an automatic bank draft or charge to your credit card that does not incur additional fees. However, you should be careful with these types of arrangements if you are still trying to manage your budget – over the limit fees on your credit card or overdraft fees on your bank account can wreck havoc on your careful spending plans.

Regardless of which method you choose, it pays to be informed of exactly how you are managing your bill payments – repairing your credit shouldn’t cost you more than it has to, and with proper planning, you will be well prepared to take care of your bills in a manner that is both convenient and free. Always ask if there will be an extra charge when you pay over the phone, and be prepared to explore alternate payment methods that will let you meet your financial obligations without charging you extra to do so.

Related posts:

1. New Credit Laws – Tactics the Credit Card Companies are Using to Charge You More When the new credit card laws went into effect in...

Related posts brought to you by Yet Another Related Posts Plugin.