9 Secrets Your Credit Card Is Hiding

Maybe you’ve had your credit card since 1975. Or maybe you’ve just waded into the credit waters this year. Either way, you might be surprised to learn a thing or two that creditors don’t clearly disclose. This isn’t to say your credit card company is deceptive or intentionally shielding some awful truth. It could be that they assume all cardholders already understand all the fine print.

Technology continues to change the way we use credit. Today’s “credit cards” are more and more about the credit and less and less about the cards. The rise of online shopping and mobile banking means you might never even take your card out of your wallet. But that doesn’t mean the “rules” don’t apply. To help you become a more informed credit consumer, we’ve compiled nine surprising things about credit cards.

1. Diners Club started it all: The first major multipurpose charge card, Diners Club, started in 1950 as a small piece of cardboard. American Express, Bank of America (Visa), and Hilton Hotels (Carte Blanche) issued their first credit cards in 1958. But the use of “credit cards” stems all the way back to 1890s Europe, when merchants developed a system of customer credit tokens to exchange for their goods.
2. “Minimum payment” is NOT your balance: Don’t let the words “minimum payment” fool you into believing that this is all you owe the credit card company. It’s simply the lowest payment, calculated as a percent of your total balance, that you can make to qualify for timely payment. If you’re financially able, opt to pay the entire balance.
3. Paying less than the minimum could equal a missed payment: Just making any old payment might not cut it. At the very least, you must submit your minimum payment amount. Otherwise you risk being reported as missing a payment and damaging your credit score. So be sure to read your statement, and if you don’t understand it, call your credit card company to verify what you owe and when you owe it.
4. Make up any missed payments within 30 days: So you missed a payment – maybe you couldn’t swing it on time, or maybe your calendar just got away from you and it slipped your mind. It happens! Don’t beat yourself up, just be sure to pay as soon as possible. If you can keep that late payment to 30 days, you may avoid being reported to the credit agencies. Creditors typically report payments that are 60 days late.
5. Paying earlier is advantageous: Your credit card payment is due on the same date every month. This is the end of your individual billing cycle – but not necessarily when your current balance gets reported to the credit bureaus. If your due date falls after your lender’s reporting date, they might actually be recording incorrect information about your finances. In addition, if you carry a balance from month to month, paying early can reduce your interest cost because the interest you’re charged is based on your average daily balance.
   
   
6. Annual fees have their place – somewhere: Some credit cards charge an annual fee so they can “afford” to offer big rewards and still remain profitable. It might be worth it to pay an annual fee on a credit card that earns you substantially higher rewards you can use. This is a very personal decision: If the rewards don’t outweigh your annual fee, you might want to ditch this card for one that better fits your lifestyle – which may lead to a no-annual-fee alternative. Before scrapping this card, though, try simply calling your lender to ask them to waive your annual fee. (The worst thing they’ll say is “no.”) Also, be hesitant if this is the credit card you’ve held the longest. Your longevity as a borrower goes a long way in establishing and maintaining your credit score.
7. Card issuers don’t like inactivity: If you keep a credit card account open but don’t use it, your bank may close it due to inactivity. Remember, it costs them money to manage your account – if you don’t use it, they aren’t making money from having you as a customer. Each institution has different policies on inactive accounts, so contact yours to ask. But an easy way to alleviate this situation is to set up an automatic payment to use that card for a small monthly or quarterly expense. You’ll keep the account active, keep your credit card company happy, and keep your balance paid off each month.
8. Your credit score is a calculation: Five pieces of your personal financial data combine to make up your score: bill payment history (this comprises 35% of your score), amount you owe (30%), length of your credit history (15%), any new credit activity (10%), and the types of credit you use (car payment, mortgage, credit card bills, personal loans, etc.) (10%).
9. Your past stays with you: Closing a credit card account does not remove it from your credit report. Negative credit information can stay with you for up to seven years. After that, the credit bureaus are required to remove it. On the flip side, a closed account with positive history – always paid on time or in full, let’s say – usually stays on your report for 10 years.

New to the world of credit cards? Want additional advice on managing your credit card use? Confused about how your credit cards impact your credit score? If you’re unclear about the terms of your card and need unbiased information from an impartial source, DebtGuru.com is here to help.