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?
I actually did not know about items 1 and 2, so thank you for researching and sharing. It takes time and effort to look into these things, but it is so important to be knowledgeable where your credit card is concerned. I think we all assume that we will be treated fairly, but that is not always the case, and if we don’t know the facts then we can’t protect ourselves if need be.
You’re so right about us assuming we’ll be treated fairly, Shannon. Plus, out of sheer ignorance, I wasn’t paying extra on that Discover card. We’ll definitely be changing things up now.
I didn’t know some of these rules but I have noticed that many credit cards are becoming more consumer friendly. It’s important to be vigilant though.
I agree, Raquel – vigilance is key in that area!
I did not know all those rules. That’s very interesting because our card bills are always received way less than 21 days before due and the due date is not always the same. Maybe it’s only that they have to be mailed by 21 days? It really doesn’t matter at this point because we don’t carry a balance, but it would have been nice to know that way back when. I hope you can get that interest debt paid down quick. It sucks!
Interesting, Kim! I cut and copied the text right from the Federal Reserve website, so I doubt it’s wrong – sounds like your cc company may be in the wrong. Yeah, we will be working extra hard to get that balance down now that we know how things work – that’s for sure.
Thank you Laurie! I did not know about 1 and 2 at all. This is good to know. Thank you for researching and sharing it.
Anytime, Brit!
Thanks for sharing Laurie! I have to be honest that I’m not very familiar with these laws so I appreciate the info. I hope you guys were able to use this to get a better deal!
We’re working on it. 🙂
That’s for the refresher, Laurie.
Was recently hit with $8.83 interest fee cause I didn’t pay off the balance in time =P
Now we have $0.00 balance and will keep it like that forever! Or at least until our next big purchase to redeem miles.
Ugh – I hate when that happens! Good for you for keeping that balance at zero. Interest is no fun to pay!
I wasn’t familiar with #1 but the rest I did know. There are lots of fine print to credit cards that most people don’t even bother to read. It’s good to know what we’re getting into … and paying for too. 🙂
Exactly! We weren’t fine print readers either, but we will be now.
Nice work putting these together Laurie. I learned these when I was in debt. It is all spelled out in the terms, but most people don’t read them. Probably because the text font is about 4 and there are way too many pages.
Exactly! I never read them when I was applying for cards. I won’t make that mistake again. 🙂
Interesting, I did not know most of these! We pay off our credit card in full every month thankfully, so we don’t usually have to worry about too much (other than not forgetting the due date!)
That’s great, Jon!! I can’t wait till we’re in that place with our cc’s. 🙂
Fantastic info about the application of payments, Laurie. It seems that, if someone can avoid putting extra charges on a credit card he or she is trying to pay off, then the higher interest rates may not have that large of an impact.
Just wanted to chime in quick and say, “Hi!” too. Cheers.
Hey to you too, DB40! Yeah, it will definitely help us to get rid of those balances quicker now that we know some facts about how the rates work.
I’d never heard any of these and it’s all good to know. There seems to be so much cloak and dagger mentality when it comes to really understanding credit cards. It must be incredibly frustrating that the CC company can apply your money to the lowest interest rate first.
Yeah, it is, but we’re prepared to be done with them for good and just get rid of the balances altogether. Then we don’t have to deal with them anymore – period. 🙂
I did not know these credit card facts. Great job educating yourself (and us) about this! Knowing that they have to send the bill 21 days before it is due explains why I always receive the bill and am surprised by how much time I have to pay.
Yeah, I’m feeling much more in control of things now that I know a bit about this stuff. Before that I felt like the cc companies had all of the control.
Hi Laurie and thanks for the awesome insight 🙂
It just goes to show that with a little research, one can save themselves a lot of hassle and money. It’s always good to know what the ground rules before getting yourself into uncharted waters…financial or otherwise.
Thanks for looking out for us 🙂
Take care and all the best.
Lyle
Exactly, Lyle!! Have a great day. 🙂
No, I didn’t know this! I’m pretty new with credit cards, as in I got my first one last year at 28. It’s good to feel empowered and educated, so thank you!
Gladly, Melanie. 🙂
I have never owed a credit card and never used one. Hopefully Romania will remain a mostly cash & debit card country in the future too – I doubt that here the truths you mentioned would work and instead they’d do anything possible to squeeze the most juice out of us :))
Romanians are so smart for not getting on this credit card bandwagon. It’s evil, I tell ya! 🙂
I like the “if your more than 60 days late on a payment your interest rate could go up.” Baaah…if you’re ONE SECOND late you can bet you’re rate is getting jacked to 29.99%. Then again…if you don’t use credit cards, you don’t have to worry about it. SUCK IT, credit cards! (I’m not bitter…not at all).
So true, Travis!! I cannot wait to give our cc companies the big middle finger. 🙂
I’m so thankful that I’ve always been able to pay off the full balance on my credit card so I’ve never dealt with the interest rates.
I’m happy for you, Stefanie. This is NOT something that’s fun to deal with. Good for you for staying away from the cc’s.
Thanks for putting this together Laurie! Unfortunately I knew most of this thanks to my own personal experience. 🙂 I didn’t know about the not raising of rates in the first year, but otherwise know full well that they’ll raise their rates whenever they darn well please.
I know. I feel like I’m dealing with the mafia here with these guys.
I didn’t know these things! I’ve never had credit card debt, but it’s helpful to know these things in order to help those who do have credit card debt.
Good for you, Becky, for staying away from CC debt. It’s not fun!
I wasn’t aware that if you make extra payments, the creditor has to put this towards the amount of debt with highest interest. Really useful to know, thanks Laurie!
Sure thing, Hayley. 🙂
Thank you for sharing this Laurie. Some of these things, I did not know!
Gladly, Mackenzie. 🙂
Wow! Reading that makes me even more happy that we’ve left that stage of life behind. I’m glad to see that many of the predatory lending practices have now been outlawed.
Yeah, at least they’ve done something to take care of that stuff.
I actually did not know most of these things! Thanks for the good info Laurie!
Sure thing, Dee. Have a great day. 🙂
Interesting, I had no idea about #1. Thanks for sharing, Laurie, and keep fighting the good fight with these darn companies! 🙂
Thanks, Anna! Can’t wait till they are out of my live forever. 🙂
I had no idea! On the bright side it does look like there are some protections in place for consumers.
Yeah, that is a great thing. And knowing these rules really helps us make better decisions about how to pay off our cc’s. Thanks, DC!
I certainly did not know those facts. Thanks for sharing Laurie!
I know – it’s crazy how much people don’t know about this stuff, isn’t it? Thanks, Marvin. 🙂
I didn’t know any of these! Once I’m out of credit card debt, I shouldn’t have to deal with any of this nonsense again, but this is good to know.
Hmm, learning something new in the PF blogosphere? It doesn’t happen often, great job!
Yeah, I feel the same way, Erin. Can’t wait to say “adios” to those CC people forever!!!
I’m glad that you were able to use that info. I learned about that first fact from the customer service people at llbean visa.com because I had previously had problems with how other companies credited our payments. I think these rules were created when the government passed new laws to benefit consumers. You try so hard to help us, nice to be able to help you.
Hey, Beth! Thanks again for sharing that info – it really was eye-opening for us! Have a wonderful day. 🙂
I had no idea about #1. I don’t utilize credit cards, but my goal for this year is to start travel hacking. Thanks for sharing Laurie!
Sure thing, Ryan!! Yes, I learned lots new during all of this too – it’s nice to know what’s in the fine print, isn’t it?