Beat Credit Card Companies at Their Own Game!

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Beat Credit Card Companies at Their Own Game!

By: Daryl Flagg

Have you ever wondered how much money a credit card company makes? Have you ever wondered how much of that comes from late fees? Everyone has and if you haven't you should because most likely you own a credit card, which means that these late fees has or could directly affect you.

As you have probably taken notice, credit card late fees are on the rise and have been so for awhile. There is enormous competitive pressure on credit-card interest rates and annual fees, and this has given way to a fee frenzy. For credit card issuers, late fees now represent their third largest revenue stream, (interest revenues and merchant fees rank first and second, respectively). In essence, those who pay late are now covering the costs for those credit card users who do not carry a revolving balance and those who file for bankruptcy.

So how much are credit card companies making from issuing late fees? Over the years we have watched the number of late fees charged to consumers jump to record-high levels. Late fees can range from $10 to as much as $40. The average late fee more than doubled since 1996 from $13.) 28 to $29.) 84.) In fact, many major card issuers are now charging a $35 late fee. Let's assume that 100,000 people made late payments for a particular month and they were charged a late fee of $30 for doing so. This would add up to $3 million in revenue. As you can see, credit card companies are making a lot of money off of card holders and there is no slow down in sight regarding the increase in late fees.

Credit card companies are making a killing off the late fees they issue to their customers and they don't mind doing it because their ultimate goal is to make money. They are like any other for-profit business in that they sell a product or service for revenue. In the case of credit card companies, the product happens to be credit. These companies aren't just some "thing" sucking up as much money as they can. These "things" are run by man. And wherever man is involved, greed also becomes involved. These people are just like you and me. They may have a family to support, bills to pay, etc. Most people don't work just for the pure enjoyment, but for money, a source of income. And the more income we achieve the easier and better our lives become, supposedly.

Some of you may be asking, "So what do we do about the late fees?" Well there's an article that I wrote awhile back that you may be interested in. You can find this article at aspx . It addresses several methods and tips to avoid having to pay a late fee. One method in particular that I would like to address further in this article is the Skip-a-Payment technique. If you happen to know that you can't pay your credit card bill for a particular month just skip it. Next Month Online is an independent company from credit card issuers. They allow their visitors to skip a payment for a nominal fee. This fee is generally 70% than your typical late fee. You will accrue no late fee and no bad mark on your credit report. Credit unions often offer this type of service for loans or mortgages, but first you have to fill out an application and then you need to qualify. With Next Month Online, there is no application to fill out and everyone qualifies as long as they have a credit card. Credit card companies are not very happy with Next Month Online because they are losing money every time someone uses the Skip a Payment service. This is by far the best service you can use if you know you will be late because you save a lot of money and avoid all the hassles that come with bad credit.

Credit card companies are not backing down from increasing fees. They, for some reason, do not see us as people who make mistakes once in awhile or people with other priorities in our lives. They want their money and they want it now! This is the reason you should not back down either. Hit them where it hurts, their pocket books. If you know you will be late for a particular month, just use a skip a payment service because the credit card companies will no longer be taking money from you, you will be taking money from them.

About The Author

Daryl Flagg is the founder and CEO of Next Month Online. Next Month Online is a service that allows its visitors to skip credit card payments. They can be found at Sign up for free!


Wendy D 03.09.2008. 19:40

What credit card is the easiest to get you approved.? I have fair to good credit and want to transfer some balances to another card for 0%. Does anyone know of a good credit card and which one would approve the easiest?

Wendy D

Admin 03.09.2008. 19:40

This is a good idea. You will pay less money in interest and more on debt repayment so you can pay off your credit card debts faster and save yourself some money. However, with 0% cards there are some potential traps you need to be aware of:

The credit card issuer is not offering you 0% APR as an act of kindness. It is impossible to make money on zero interest or even very low interest rate cards, so why do the card companies do it? Understand their motivations and strategy and you will be much better equipped to beat them at their own game. How exactly do they plan to profit?

The card issuer is taking a calculated risk that you simply will not pay off your balance before the end of the honeymoon rate period. They are betting that in 6-12 months when the introductory rate period expires, you will still owe them money that you will then be obliged to repay at a higher rate. Therfore, a good technique for examining any credit card balance transfer deal is to forget "what is in it for me" for a moment, and instead spend some time making sure you understand all the fine print and "what is in it for them?"

For example, the credit card balance transfer deal may have restrictions on the minimum amount you may transfer. It will almost certainly only allow a fixed time for repayment before there will be a rate change (i.e. an interest rate increase). Eventually the new credit card will revert to a more market-based APR, possibly even higher than the present rates you are paying. You need to know exactly when there will be an increase in the interest rates after the introductory period, and ideally how much this will be.

Another thing that the typical credit card balance transfer deal is notorious for is that the lower interest rate applies only to the initial amount you transfer. After you make your balance transfer you may find that if you then need to use your new card for other purchases or payments, the interest charged will be as high as or higher than your previous credit card provider.

You also need to understand exactly what will happen if things go wrong and you miss a payment or two. In most cases you would pay late fees and penalties, or even a higher rate. These charges may wipe out anything you gained in making the transfer.

Most of all, carefuly calculate how long it will take you to pay off your complete balance. Be conservative. Will the magic zero interest rate apply for the entire length of time you need?

Sometimes, the credit card balance transfer deal gives with one hand and takes with the other. What I mean is the short term benefit of the lowest interest possible (ideally zero!) may be offset by an annual fee, various processing fees such as the cost of convenience checks, and the risk of high late fees and penalty interest rates if you run into some bumps with your repayment schedule.

Just please be aware of the traps described above, and don't play balance transfer musical chairs. The ideal outcome is to get rid of debt, not just keep shifting it around.

The best balance transfer deal will have these features:

1. No fees Often balance transfer fees are when you first open your new account. Take advantage of this! Transfer as much of your higher rate balances immediately instead of waiting. After the initial transfer it is common to be charged a percentage of the balance transfer as a fee.

2. Clearly defined introductory period Make sure this is absolutely clear and that the low/zero introductory rate applies for a definite period such as 6 or 12 months.

3. Specified increase Nobody can predict interest rates with certainty so this may be difficult, but try and find a deal that tells you the rate that will apply at the end of the introductory period. Obviously it is better if this is standard rate that is still competitive - not something really savage like over 20%.

The Discover More Clear card is rated well by consumer comparison sites and offers 0% APR for 12 months. It is much easier to get than the similar deal from Advanta.


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