Credit card companies, banks and even payday loan companies are all out to make as much off of John Q. Consumer as possible. Some of the most lucrative ways of meeting that objective have everything to do with your financial habits. Here are four of those habits that the industry as a whole hopes you don’t break anytime soon.
Disputing Credit Report Errors
It’s believed up to 30% of all credit reports have errors. These errors can cost you big time – but for the banks and credit card companies, the lower your scores, the higher the interest you pay – and the more profits for the bank. This is why it’s so important to check your credit reports every year – especially if you anticipate buying a new car or home.
Be sure to request your report from all three credit bureaus: Experian, TransUnion and Equifax. Don’t be surprised if you see they vary from one to the next. It’s common. Your goal is to ensure it’s all accurate.
Renew that Payday Loan
Payday loans or cash advance loans have always been controversial – and for good reason. Until recently, these companies were often not policed and consumers were paying interest sometimes of up to 800%. Here’s how they work: A cash-strapped borrower writes a personal check that’s payable to the cash advance company for the amount he wants to borrow.
He must also include the fee he must pay for borrowing the money. The company “advances” the borrower the amount of the check, minus the fee, and agrees to hold the check until the loan is due. The due date is usually based on the borrower’s payday schedule. The company might instead deposit the borrower’s check on the agreed-upon date.
Because the fees are so high, many have found themselves in a vicious cycle of paying only the fees until “next” payday, only to repeat the cycle again. Those fees continue to roll over and the principal is never paid down. Clearly, this is a lucrative business for some in the financial sector.
Your best bet is to find a different alternative such as a secured loan from your bank if you have credit problems.
A Day Late
Everyone has looked at the calendar and realized, in horror, that their credit card payment was due yesterday. We immediately log into our credit card company’s secure payment site and make the payment, only to notice a $35 (or more) late fee tacked on to next month’s statement.
The credit card company’s not out anything – you were a day late (versus 30 or 60 days) and because your “payment due” epiphany didn’t occur until twelve hours later, it’s going to cost you a late fee. Credit card companies love consumers like you because first, you’re not a credit risk (unless you’re often late with payments) and those small blunders on your part are making the company’s bottom line that much more impressive.
Avoid this by setting reminders on your iPhone or email calendar. Allow enough time to ensure the payment makes it through the proper channels.
Go Over Your Limit
Again, this is another no-brainer for credit card companies. In most instances, your card company will let you exceed your credit limit. But like the late fee, you can expect to see a handsome price tag for that convenience on your monthly statement. Think it can’t happen? Consider the married couple who agree to buy a new television for the family room.
Mom assumes she needs to take responsibility and buy it while Dad’s also thinking the same thing. Dad buys the TV on the Visa as Mom finds one online and since she has the credit card number memorized, she just keys it in. There was more than enough available credit for one TV, but that second purchase put them over the limit by, let’s say, $10. The credit card company approves both transactions and that $10 is now going to cost $35 in over the limit fees – not to mention the interest the company will charge if the balance isn’t paid in full by the due date.
The good news with these situations is a phone call to your card company just might be what frees you from that pesky fee. Remember, though, it’s a courtesy they extend only if they want to – they’re not obligated to do this.
All of these quagmires are easy to handle – and in doing so, you can save yourself a world of frustration, not to mention a more impressive credit history. While these four scenarios benefit banks and credit card companies, eliminating potential problems benefits you and your family. And in these tough economic times, every little fee you’re able to avoid is a good thing.
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