The following is a guest post from Monica Clark who writes about all kinds of money and personal finance topics at DirectBanc.com
If there’s one thing we’ve learned over the last few years with all of the scrutinies on credit cards, is that they are not a one-size fits all type of financial instrument and each kind has a lot of different moving parts. For people of the “set it and forget” variety, not paying attention to all of the various aspects of your credit cards can be costing you money.
If you never think about your credit cards until you actually use them or when you receive your monthly bill, you may be missing out on some big savings or paying fees unnecessarily. At the rate that credit card terms change, a regular review of your accounts is essential to ensure you are optimizing your benefits while minimizing your costs.
Watch Out For Cost Creep
Banks are under tremendous pressure these days to increase their revenue, and the easiest and quickest source is with their credit cards. Although recent legislation and regulation now subject the banks to a greater degree of transparency in their fee structure, banks are not shy about looking for nickels and dimes among their credit cardholders.
They still have every right to adjust rates and fees but they are likely to be more stealth about it. That’s why it’s important to actually open the notice of change in terms you receive from your card issuer. It usually contains something affecting the way fees are charged. They can also set new parameters for determining the APR on your card. By the way, did you actually look at the APR on your last statement? Those are slowly creeping up as well.
What To Do About Cost Creep
Most people tend to look at their credit card terms and account statements with resignation, thinking that there’s nothing they can do about rising costs short of canceling their cards. But that could be a mistake, as it could hurt your credit score. What they don’t know, or maybe they do but are afraid of confrontation, is that a simple call to the issuer will often time result in some rate relief or reduced fees.
Banks are not afraid to bump your rate because the chances are that either you won’t notice it or you won’t do anything about it. However, they are just as afraid of losing good customers to their competition who has a lower interest credit card. Whether your rate has been raised, or you think that it is too high relative to the competition, you need to give your card company a call.
There’s at least a 50 percent chance they will acquiesce and lower your rate. The same with fees; solid, long-time customers can usually have their annual fees reduced or waived. Also, if you think that an inactivity fee or an over-limit fee is too steep, try negotiating with the card company to reduce or waive it. They are generally open to one-time waivers, especially if you have a good history with them.
Getting Your Just Rewards
If the credit card companies have done anything positive, it has been the enriching of their rewards programs, especially some of the cash back programs.
Letting your credit card collect dust because you are determined not to get into debt may be costing you hundreds of dollars a year in lost benefits. If you have to spend your money anyway on such things as groceries, gas, travel, entertainment, clothes, etc, why not get paid for doing so?
A typical family budget of $20,000 for food, gas, clothes and such could generate $200 in cash back with a 1 percent cash back program. Cashback programs with 2 or 3 percent rewards for gas and grocery purchases are not uncommon.
Many cards offer cash back bonuses of up to 5 percent in certain spending categories that revolve every two or three months throughout the year. It may seem like a lot of work to keep watching your card statement to see what spending category is coming up next, but the savings in cash back could be well worth 5-10 minutes of your time.
Furthermore, if you haven’t checked out your card company’s online store, you could be missing out on even bigger savings. You can usually find cash back bonuses of up to 20 percent for purchases made through certain retailers.
Money is tight these days, and if you are simply sitting on your credit cards, you may be losing the nickel and dime battle with the card company. It’s time to get off your duff and get the upper hand.