Credit Card Tricks: Little Known Ways They Try to Rip You Off

Vanishing Grace Periods

As you can probably attest to, American consumers are bombarded with credit card offers through the mail, as well as email, on a daily basis. Young, old, employed, or not employed-no one is left out. Even those with questionable credit histories are encouraged to respond to "pre-approved" offers. It's obvious that competition among credit card issuers has never been more intense. Because of this, lenders are constantly thinking up new, and legal, ways to increase their profits, and that means getting more of your hard earned money. With so many ins and outs, policies and procedures, and fine print, it's hard for consumers to be credit card smart, let alone decipher your monthly statements. One area they try to trip you up on is grace periods.

The Incredibly Shrinking Grace Period

If you aren't exactly sure what the grace period is on your credit card, now is the time to become fully informed. Lenders may be making a lot more money off your purchases than you realize. The grace period is the number of days you have to pay your bill in full without paying finance charges. For example, a lender may offer it 25 days from the statement date, which is given on the bill. Typically, the it only applies to new purchases and accounts with previous purchase balances of zero dollars, not cash advances or balance transfers. It's up to you to find out what is included or excluded.

Once upon a time, grace periods were about 30 days, but now they can be as low as 20 days, or none at all. When you look at the grace period in terms of the statement date and due date, consumers can end up with a short period of time to pay their bill without interest accruing, or interest may already be added before you get your bill. For example, my credit card statements are generated and mailed at the end of every month, around the 26th, and the due date is the 16th of every month. The grace period is 20 days. By the time I receive the statement in the mail, I have a very short time before it's due, which is why I pay bills twice per month, instead of once. My credit card payment used to be due around the 25th of every month, giving me a longer grace period.

What you can do

Inform yourself! Contact your lender and ask them straight out "how long is the grace period?"-they may try to give you vague answers, such as "at least 20 days," but pin them down to specifics. Read the back of your statement regarding how and when the finance charges are computed. When you get your statements, read everything. Many have "card member news" sections that notify you of any changes. If you typically pay off your balance every month, make sure you have a card with a grace period of at least 25 days so you won't accrue finance charges. I had a friend who discovered their lender whittled down the grace period to zero days and she was shocked with all the finance charges. She called immediately and asked them to reverse the charges-and they did! Now she is much more aware of what to look for, giving her much more control of her money.

If you do carry a balance and have no grace period, you're really getting socked with the charges. If the lender won't adjust your grace period, consider closing the account.

The Fair Credit and Charge Card Disclosure Act requires credit and charge card issuers to include a table disclosing the following items: annual percentage rate, the regular rate if there is a discounted introductory rate, how variable rates are determined, the annual fee, the minimum finance charge, transaction charges associated with the use of the card, the grace period, how finance charges will be calculated, and any other fees. Also, the law requires card issuers to give consumers this disclosure with renewal notices if an annual fee is charged.