While consumers and card issuers have grown cautious with usage and issuance recently it remains a cardholder's
market. Competition is so strong it has driven some issuers overseas for growth. MBNA America, Advanta, Capital One
and People's Bank are now competing vigorously with established card issuers in the U.K.. But here in the U.S. every
creditworthy consumer who wants a credit card has at least one. The marketplace is literally saturated with plastic. To
entice applicants, card issuers have dangled just about every carrot imaginable. Nevertheless you can personally take
advantage of the current state of the credit card marketplace if you learn a few tricks. Apply the advice in this issue and
you'll be eating the whole cake instead of just the carrot.
#1. The Squeaky Wheel TrickBelieve it or not cardholders can negotiate lower rates and fees just by complaining or threatening to close their account. With credit card balances averaging more than $2,000 per account and generating in excess of $350 per year in interest charges on average, consumers have substantial leverage with card issuers. The ability to transfer balances painlessly from one credit card to another adds even more leverage. Furthermore card issuers' acquisition costs can run between $75 and $140 per account. As a result, issuers will generally respond to cardholders who "squeak" by waiving fees and/or reducing interest rates, either short-term or long term. As a matter of fact several informal surveys, conducted by various personal finance magazines, have shown persistent consumers received even lower rates by continuing to squeak.
#2. The Hop, Skip & Run TrickGiven the prevalence of teaser, introductory or short-term credit card rates cardholders can "hop, skip or run" to the next great deal after such rates expire. With more than 2.5 billion solicitations being mailed out each year American consumers have no problem finding another deal offering single digit interest rates. This trick requires a little planning though. For example you'll have to mark your calendar for the expiration date of the special rate. It is also best to keep up with your credit report, making sure accounts you close, as you jump from one account to another, are accurately reported. There is no compelling reason to remain loyal to any one card issuer if you carry a balance from month-to- month. So go ahead and make your "leap" to the best deal today and keep "jumping".
#3. The Peter, Paul or Marry TrickConsumers who desire both a low interest rate and good rebate will have a difficult time finding such an offer. However by "Robbing Peter to Pay Paul" or "Marrying Two Accounts" a consumer can use a rebate card for charging all purchases and then transfer the monthly balance to a lower rate card. Most rebate cards offer rewards based on what you charge not what you owe, but the interest rates on rebate cards average between 17% and 21%. Consumers with reasonably good credit can generally qualify for cards around 12% or 13% today. By juggling two accounts and using the balance transfer feature, cardholders can get the best of both worlds.
#4. The Timing is Everything TrickThe most important feature for cardholders who pay-off their balance each month is the grace period. Knowing the starting date and the closing date for the billing cycle can enable cardholders to time purchases for the maximum float period. Charging early in the cycle and paying off as close as possible to the billing due date can produce a free interest period of 50 to 60 days. Some issuers with electronic bill payment services can insure your payment gets posted on the due date. You can also wire payments on the due date if the balance is large. Be careful though: if your payment arrives even one day late you'll not only face interest charges but also a hefty late fee. Furthermore those habitually late could face still higher interest rates.
#5. The Churning TrickSome stockbrokers are known for switching your portfolio around often to generate extra commissions. Well you can apply this same trick to credit cards. Some credit card issuers offer free balance transfers and points for each dollar transferred. Savvy cardholders can sign up for a new rebate card, transfer the balance for the points, and then later transfer the same balance to another card for other points. The same debt can be used to generate multiple rewards. Some issuers are wise to this trick now and have placed limitations on how much and how often you can transfer a balance for reward points.
#6. The Pedal to the Metal TrickCardholders of rebate cards should put their credit cards in "overdrive" by charging everything. Maximize rewards by researching ways to generate as much charging volume as possible to credit cards. Charging groceries, phone bills, doctor bills, insurance premiums, tuition and even down payments on automobiles can raise charging volume by thousands of dollars per year. Don't forget about small things too, like postage. Consumers with business charges can especially drive high charge volumes. Again, card issuers are wise to this trick too and may limit how much you can earn in rebates each year. However, if you max-out the rebate on one card switch to another rebate card.
#7. The Uncle Sam TrickCongress phased out the tax deduction for credit card interest in the late 1980's. You can regain this deduction with a little fancy footwork. If you own a home you can apply for cards tied directly to your home equity. You can also accomplish the same goal indirectly by opening a home equity credit line and then transferring the balance from your credit card to the home equity credit line each month. Best of all, home equity credit lines offer significantly lower interest rates than credit cards. So have your cake and eat it too, courtesy of Uncle Sam. If you have a business on the side make sure you do not commingle business purchases with personal purchases on your credit cards. While you cannot directly deduct personal credit card interest the IRS still recognizes business interest charges as a deductible business expense.
Apply these simple tricks now and prosper.
