Credit Card Facts: The Good, The Bad and The Fun
, by Rob Kaufman
When our debt is low (or non-existent), we usually enjoy our relationship with credit. We have peace of mind knowing that our money and budget are "under control," and that realization typically provides us with a sense of freedom. However, the greater our debt grows, the more strained our relationship with credit may become. We can come to view credit as an opponent, something to struggle against in order to maintain balance in our lives.
Everyone's relationship with credit and credit cards is a personal one and can be a delicate subject. That's why today we're going to lighten things up with some credit card facts that might surprise you and maybe even change the way you feel about credit itself.
Credit Card Facts You Probably Didn't Know About...
Your credit card number is far from random.
All valid credit card numbers meet the criteria of the Luhn Algorithm. If you start from the right of the number and double each second digit (i.e., 1111 becomes 2121) and add them together, it should result in a number evenly divisible by 10. If it doesn't, it's not a valid credit card number.
You're protected by the CARD Act
The CARD Act of 2009 ( C redit Card A ccountability, R esponsibility and D isclosure Act) protects consumers with regulations like: making card issuers inform consumers of minimum payment consequences; giving consumers at least 21 days to pay their bills; restricting and, in some cases, capping late fees and over-limit fees; plus a lot more.
Credit at the pump can be dangerous.
When using your credit card or debit card at a gas pump, the card is immediately authorized for a purchase of around $50 (even if you only pump $25 worth of fuel). If, at that time, your card's remaining limit is less than $50, the pump will reject the attempted purchase. Another potential problem: Let's say the gas purchase is $25 but the $50 charge depletes your account. If you try using the same card somewhere else, it will show that your account is empty and your card will most likely be rejected.
Credit card ID's.
The first digit of a credit card number is its industry identifier. 1 and 2 = airlines; 3 = travel/entertainment; 4 and 5 = banking/financial; 6 merchandising/financial; 7 = petroleum; 8 = telecommunications. The first six digits refer to the issuer. For instance: 34XXXX/37XXXX = American Express; 4XXXXX - Visa; 51-55XXXX = MasterCard; 6011XX = Discover. The remaining digits (except the last one) is your account number.
Is decreased debt just a phone call away?
If you feel that your credit card interest rate is too high, you can always call the lender and ask for a rate reduction. The lender wants your business and knows that you have the potential to transfer your balance to another lender's credit card. Since they want to keep your business (and make money through your interest payments), they just might be willing to work with you. As the old saying goes, "It never hurts to ask!"
The minimum payment dilemma
The longer you pay minimum payments on your credit card debt, the longer it will take to pay it off. For instance, if you owe $2,000 with an 18% annual rate and a minimum payment of 2% of the balance (about $10), it would take just over 30 years to pay off the debt. That's $4,931 in interest and charges - 147% more than the original balance.
Who authorized this?
If you find that you have unauthorized charges on your credit card, you're only responsible for $50 max (or less, depending on what's in your credit card agreement). If you report your card missing or stolen immediately after you realize it and an unauthorized charge appears on your card after your report is made, you shouldn't owe a penny.
Trillion not billion
A new Wallethub.com study shows that in the second quarter of 2017, U.S. consumers added $33 billion in credit card debt. The study projects that by the end of 2017, Americans will add $60 billion more to their credit card debt totaling over $1 trillion.
Want to know how a lower credit card rate could affect your balance... or if a lower rate is worth an annual fee? Check out the myFICO calculators . You can also get credit card answers to your questions on the Credit Card board at myFICO forums .