Strange But True: Credit Card Hacks That Can Save You Money

 

Strange But True: Credit Card Hacks That Can Save You Money

Credit cards can be a double-edged sword. Used wisely, they can help build your credit score, earn rewards, and even protect you from fraud. But used unwisely, they can lead to debt, high-interest rates, and financial headaches.

This article dives into some of the strangest, but surprisingly true, hacks for using credit cards to your advantage. Keep in mind that some of these might not be applicable anymore, but they offer valuable insights into how credit cards work and how you can potentially leverage them for your benefit.

Hack #1: Waiving Late Fees (Maybe)

Let's face it, missing a credit card payment happens. The good news is, a single late payment might not impact your credit score as much as you think. Even better news, you might be able to get those pesky late fees waived.

The key is to act fast. Call your credit card company as soon as you realize you've missed a payment. Be polite and explain the situation. Sometimes, customer service representatives are authorized to waive the fee, especially if it's your first offense.

Hack #2: Credit Card Rewards vs Dealership Financing

This hack revolves around maximizing your credit card rewards program. Here's the scenario:

• You're at a car dealership ready to finance your dream car, a Tesla for instance, with an interest rate offered by the dealership.
• But wait! Your credit card offers a fantastic cash back reward program.

Here's the twist:

• The dealership might not accept your credit card directly.
• Instead, they might use a third-party payment processor that charges a fee.

Now, the interesting bit:

• This third-party transaction might be categorized as an advertising expense by the credit card company.
• If your card offers bonus points for advertising purchases, you could end up earning a significant amount of cashback, even after paying the processing fee.

Important Disclaimer: This hack relies on a specific situation and might not be applicable anymore. It's also important to remember that credit card interest rates are typically higher than car loan rates. So, do the math before deciding which option saves you more money in the long run.

Hack #3: Dodging Annual Fees with the Truth in Lending Act

The Truth in Lending Act is your friend when it comes to credit card annual fees. Here's how it works:

• The act prohibits banks from charging an annual fee in the first year if the fee is more than 25% of your credit limit.

Let's break this down with an example:

• Imagine you have a Chase Sapphire Reserve card with a $550 annual fee.
• According to the rule, you wouldn't be charged the fee if your credit limit is $2,200 or less (because 25% of $2,200 is $550).

Another Twist: Some credit card companies allow you to temporarily lower your credit limit on one card and transfer some of that limit to another card to qualify for this exemption.

Important Note: This strategy might not be ideal for everyone. Lowering your credit limit can increase your credit utilization ratio, which can negatively impact your credit score.

Hack #4: Keeping Your Credit Utilization Ratio Low

Your credit utilization ratio is a fancy term for the percentage of your available credit limit that you're actually using. It makes up a significant chunk of your credit score (around 30%). The lower your credit utilization ratio, the better it is for your credit score.

Here's the hack: Aim to use less than 10% of your credit limit. This means if you have a $1,000 credit limit, try to keep your outstanding balance below $100.

How It Works: By keeping your credit utilization ratio low, you demonstrate to potential lenders that you're a responsible borrower who doesn't max out your credit cards.

Hack #5: The (Not-So-Infinite) Money Glitch (Proceed with Caution)

This hack hinges on a concept called manufactured spending. It involves using your credit card to buy things you can easily turn into cash, maximizing your rewards points. Here's a (hypothetical) example:

• You have a credit card that offers 5% cash back on groceries.
• You buy a $100 prepaid debit card at the grocery store using your credit card (earning 5% back, or $5).
• You then use the prepaid debit card to buy a money order, essentially converting it back to cash.
• You use the money order to pay off your credit card balance, eliminating the debt and keeping the $5 cash back.

The Big Warning! This strategy is risky. Banks consider manufactured spending