Credit Cards - If Credit Cards Had Teeth Would You Swim With Them?

Swim with credit cards you ask? Do you remember the movie Jaws? In an early scene, contrary to the wishes of Chief Brody (played by the late Roy Scheider) Mayor Vaughn of the fictional town of Amity ordered that the local beaches remain open on the Fourth of July despite the fact that a huge great white shark was feeding in the local waters. As expected, the 3 ton great white shark swam in on cue and took his victim from the beech leaving beachgoers traumatized. I only mention this because it is often how many of us deal with credit cards. We know what to expect, yet we wait around like hapless victims until it happens. Then we complain about how we knew what to expect and should have done something to prevent it. Yes, if credit cards had teeth we would likely call them sharks. The difference being this particular breed of shark will continue to nibble at your finances until it has chewed you into financial ruin if you are not vigilant.

Let's take a closer look at six of the sharpest Credit Card teeth.

Late Fees:

Credit card late fees can quickly increase the cost of having the credit card. Between 1994 and 2004 the average credit card late fee went from $12.55 to $32.65. Late fees amount to an added finance charge. Now days, credit card companies are charging late fees depending upon the amount of your balance. For example you may have a late fee of $20 if your balance is less than $100., $29. if your balance is less than $300. and $39. for balances above that. If that isn't bad enough the credit card company may significantly raise your interest rate. Solution: Be sure to pay your credit card bill on time. If you can, try to pay your bill as soon as you receive it.

Cash Advance Fees:

Using your credit card to get cash like an ATM card is unwise. Cash advances have become some of the most expensive transactions that a card holder can make. Cash advances can actually cost you hundreds of dollars more than the actual cash amount borrowed. This is because credit card companies often charge a cash advance fee between two and four percent of the cash advance amount, as well as assessing a significantly higher interest rate on the cash advance than traditional credit card purchases. Additionally, with a cash advance, there is no grace period for repayment because the interest rate is charged beginning on the day of the cash advance. Solution: Do not use the cash advance feature unless it is an absolute emergency.

Over-the-limit Fee:

Here's a tooth that has been dulled a bit by the new credit card laws. As of February 2010 credit card companies won't be able to charge over-the-limit fees because you won't be allowed to go over your limit unless you opt in. This means you now have to ask for this over-the-limit feature to be placed on your card prior to going over your credit limit.

Credit Card Balance Transfer Fee:

Most major credit card companies allow you to transfer a balance from an old card to a new card. To encourage balance transfers banks offer low or 0% interest for a limited time. Before transferring a balance from one card to another, be sure to check the balance transfer fee on the new card. Some credit card companies charge anywhere from two percent to five percent of the transfer amount. If you make a payment late your introductory balance transfer rate will immediately be replaced with a much higher rate.

Shrinking or No Grace Period

A credit card grace period is the time between the statement date and the payment due date. During this grace period you my pay off new purchases on your credit card bill without having to pay interest. In years past the grace period was 28 days on average. Today, the grace period is around 21 days. The grace period does not apply to cash advances and balance transfers. Additionally, if you have any part of a balance carry over from a previous month, there may not be a grace period with some credit card companies. Solution: Try to get a credit card with the longest grace period. Try to pay off all new purchases right away and not carry over balances from month to month.

Poor Customer Service:

Poor customer service has plagued credit card customers in recent years. It can make even the simplest of issues quite dramatic. There are numerous stories and complaints about credit card customer service nightmares. Bad customer service stories range from rude customer service representatives, to the inability to even reach a representative to resolve issue and answer questions.  Some credit card companies are now advertising that you'll get an actual human voice when you call them on the telephone. Hmmm. What a novel concept. Some high end credit cards even offer 24 hour concierge service. Solution: Apply for a credit card where the issuer stands behinds their customer service and guarantees you'll get a human voice via the telephone.

Just like sharks, credit cards and credit card companies are at the top of the food chain and play a necessary role in the modern world. Today, it is difficult to function day to day without some type of credit card. This is why it is important to select the right credit card for your financial situation; the credit card with the fewest teeth if you will. For example, Discover card has earned the highest ranking in customer loyalty for the past 13 years. (Brand Keys Customer Loyalty Engagement Index) and Chase credit card now places renewed emphasis on customer service.