What Credit Card Companies Don't Want You to Know

Credit card companies make billions of dollars a year, and a lot of it comes from things they never clearly explain to you. Here is what is actually happening behind the scenes.

Your Statement Date Is Not Your Due Date

Most people only pay attention to the due date. But the balance reported to the credit bureaus is usually your statement closing balance, which happens weeks before the due date. Paying in full by the due date protects you from interest, but if you want to look better to the bureaus for a big application, pay down your balance before the statement closes, not just before it is due.

Minimum Payments Are Designed to Keep You in Debt Longer

Minimum payments are calculated to be just enough to avoid a late fee while maximizing how long you carry a balance and how much interest you pay. A $5,000 balance at 24% APR paying only minimums can take over 15 years to pay off and cost thousands in interest.

They Can Lower Your Limit Without Telling You Why

Credit card issuers can reduce your credit limit at any time based on internal risk models, even if you have never missed a payment. This instantly raises your utilization ratio and can hurt your score, all without you doing anything wrong.

Rate Increases Are Often Automatic After a Late Payment

One late payment can trigger an automatic penalty APR increase, sometimes as high as 29 percent, and it can apply to your entire balance, not just new purchases. This is legal and buried in the fine print of most card agreements.

You Can Usually Just Ask for a Lower Rate

Here is what they definitely do not advertise: if you call and ask for a lower interest rate, especially if you have a decent payment history, many issuers will grant it on the spot. It costs nothing to ask, and it is one of the simplest ways to save real money.

Understanding how the system works is the first step to using it in your favor instead of the bank's. CreditGM offers a free analysis to help you see exactly where you stand.