12 Secrets Credit Card Customers May Not Know

Understanding how your card works now could save you a lot of money later.

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Updated May 28, 2024
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Many credit cards offer low introductory interest rates or valuable reward points, making these cards a popular choice. But some customers don’t know exactly how these cards work, which can cost them a lot of money.

From limitations on introductory APRs to lesser-known fees and penalties, it’s essential to learn how these credit cards work before signing up if you want to keep more money in your wallet.

Here are 12 credit card secrets customers may not know about.

Your interest rate may not be fixed

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Credit cards may come with a fixed interest rate, but that rate can change. While a variable interest rate is typically tied to the Federal Funds rate (set by the Federal Reserve), a fixed-rate credit card has a set rate when you sign up.

But all credit card companies reserve the right to change that rate at anytime. This means rates can go up or down without much prior notice, so you should pay close attention to avoid wasting your money.

Balance transfer checks come with fees

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Some credit cards may come with a small checkbook, which allows you to pay for purchases that don’t accept credit cards.

However, these balance transfer checks will typically charge a fee for using them. It’s important to read the terms and conditions of your card to ensure you understand the limitations and fees involved with using balance transfer checks.

Credit card interest compounds

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Your credit card interest compounds over time. So, if you leave a balance unpaid on a credit card, the interest charged each month is added to your total balance.

New interest is charged on that new balance, meaning you pay more interest each month you don’t pay your card off. This can seriously affect your balance and make it more difficult to pay off down the road.

This is why it’s essential to make minimum payments and pay down your cards when you have the cash available instead of waiting as you may on other debt.

You don’t have to pay off your entire balance to avoid interest

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Interest rates on credit cards are usually higher than other types of debt. While paying off your card in full every month is a good idea, you don’t have to pay off the current balance on your card to avoid interest charges.

Instead, you can focus on the “Statement Balance” when paying off your card each month. This balance is captured at the end of your billing period, not necessarily what you’ve charged on the card.

So, while you may have added more charges since the billing period closed, you only need to pay the statement balance to avoid monthly interest charges.

Some cards waive foreign transaction fees

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Some cards waive foreign transaction fees. This can save you a lot of money if you travel internationally and use your credit card.

This means there is no currency exchange fee or additional network fee to use your card in other countries. Foreign transaction fees can often be up to 3% (or more), so for larger purchases, this can save you quite a bit of cash.

Your credit card can be canceled if you don’t use it

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If you have no activity on your credit card, issuing banks reserve the right to cancel your card due to inactivity.

While this might not seem like an issue, if you have an older credit card and your account is closed, it can affect your “age of credit” on your credit report and hurt your credit score.

It’s best to keep your oldest card open (assuming it has no annual fee) and make a few purchases a year on it at a minimum.

You don’t build credit faster leaving a balance on your card

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Contrary to popular belief, you don’t need to charge things to your credit card and leave a balance to build your credit profile.

Not only does this not help your credit score, but you may end up hurting your score if you use up too much of your available credit. Instead, you can pay off your credit card statement balance in full each month and still build your credit over time.

Credit card sign-up bonuses have spending requirements

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Some credit cards come with great welcome offers. These bonuses can earn you a bunch of cash back or points that can be used for travel or other things.

But if you don’t follow the terms of the credit card bonus and don’t meet the minimum spending requirements, you might not earn the bonus. It’s important to understand all the details before applying.

0% intro APR offers come with some limitations

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Some credit cards offer promotional 0% intro APRs, but most have limitations on how to use this benefit.

For example, a balance transfer card may give you a 0% intro APR for 18 months (or more), but a balance transfer fee can be assessed on the amount moved over.

You may also need to transfer those funds within a certain amount of time after opening the card, or it may not qualify for the 0% intro APR promotional rate.

Finally, some 0% intro APR cards might charge you interest if you make a late payment and could even back-charge interest fees, so it’s important to make on-time payments on these types of cards.

Late payments can carry hefty fees

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Late payments on your credit card can carry high fees, which are added to your card balance, or you may be subject to a higher interest rate when making a late payment.

These fees can even be charged multiple times if you fail to make multiple payments in a row.

The best way to avoid late payments is to understand your due date and pay at least a few days before. You can also set up automatic payments to ensure you never miss a payment date.

Late payments can affect other card APRs

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If you make a late payment, you may have to pay a higher interest rate on all your credit cards, not just the one you were late on.

This is at the bank's discretion, but late payments affect your creditworthiness and may cause your rates to change when you least expect it.

The best rewards cards may come with annual fees

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Some top credit cards offering rewards may come with an annual fee. These cards typically have higher welcome offers and better rewards earning capabilities.

However, be aware that the annual fee is typically either charged on the first statement or your statement after you’ve had the card for a year. Don’t be surprised by the extra charge when paying it off.

Bottom line

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There are many good credit card options that can offer you many features you may be looking for, but it’s essential to understand how these cards work before you apply. 

It could cost you if you don’t know how fees are assessed, or how interest rates work for these cards.

The best way to handle any credit card is to spend money you already have in the bank and pay them off in full each month. This will allow you to avoid costly fees and interest.

You can combine timely and consistent payments with a card that helps you earn cash back to maximize how far your money can go.