I’ve been watching the interest on our Discover card go up and up, since a large portion of our balance there just ended it’s 0% introductory rate and is now costing us money. When I apply my payments, they go toward the rest of the balance first, which is still at zero percent. Prompted by a tip off from a Facebook commenter, I checked into seeing if this was legal or not, I learned some interesting facts** about credit cards, interest rates and our payments to those cards, and here’s what I found out:
1. When you make the minimum payment, the company has every right to put that money toward the lowest interest rate balance portion of the card first. However, if you make over the minimum payment, all of the extra portion of the payment has to go toward the highest interest rate balance, unless you specify otherwise to the company.
2. If a credit card company raises your interest rates for reasons other than a default, the new higher rate applies only to purchases made after the new higher interest rate takes effect. They can’t go and raise the rates on your existing balances. In addition:
No interest rate increases for the first year. Your credit card company cannot increase your rate for the first 12 months after you open an account. There are some exceptions:
- If your card has a variable interest rate tied to an index; your rate can go up whenever the index goes up.
- If there is an introductory rate, it must be in place for at least 6 months; after that your rate can revert to the “go-to” rate the company disclosed when you got the card.
- If you are more than 60 days late in paying your bill, your rate can go up.
- If you are in a workout agreement and you don’t make your payments as agreed, your rate can go up.
3. Regarding payments:
Your credit card company must mail or deliver your credit card bill at least 21 days before your payment is due. In addition:
- Your due date should be the same date each month (for example, your payment is always due on the 15th or always due on the last day of the month).
- The payment cut-off time cannot be earlier than 5 p.m. on the due date.
- If your payment due date is on a weekend or holiday (when the company does not process payments), you will have until the following business day to pay. (For example, if the due date is Sunday the 15th, your payment will be on time if it is received by Monday the 16th before 5 p.m.).
Knowing these facts about your credit cards can save you money, and it can help you determine how to pay your bills in a way that is most beneficial to you financially.
Did you know these facts about credit cards? Will learning these facts change the way you are currently paying on or handling your credit cards?