5 Details Your Banker Will Avoid to Mention
The truth is, the banks don’t want you to know about the fees on their products or how the interest is calculated on your credit card because they don’t want you to know how to avoid them. Therefore, you need to take control of your financial education and find out the top five things your bank will avoid telling you.
1 You can earn interest on your interest
When you talk about savings accounts this is a positive thing because compounding interest allows your funds to grow faster because you are earning interest on your interest and on your principal balance. However, when it comes to your credit card this is not good news because if your interest for the next month of your credit card cycle is being calculated on interest which has already been applied to your account from the previous month then you are being charged interest again and again.
This is not a common practice among all banks, but all of the big banks do it and most of the second tier banks too. Not only are you probably being charged interest on your credit card interest, you could also be being charged interest on your fees. Some credit card providers will simply take the closing balance of your account – including your purchases, your interest charges from previous months and any fees which have been added to your account – and calculate interest for the next month based on the entire balance, rather than just on the purchases you have made.
2 You’ll be charged the cash advance rate at the end of a balance transfer
You may already be aware that if you have chosen a limited time balance transfer offer, that any balance remaining at the end of that period will be charged a higher interest rate. However, what you may not have noticed in the fine print of many balance transfer offers is that this higher rate is not just the credit card’s purchase rate, but is the cash advance rate which can be another 5% higher than the standard purchase rate of the card.
3 Your credit card payments may not register
Your credit card statement will arrive on the same day each month, and your payment will be due on the same day each month. However, if you make an additional payment to your credit card outside of the specified payment period, that amount will not go towards your monthly payment – even if it is enough to cover the monthly payment – and your account will register as being in default.
This is because you have not paid the amount during the right period, and even if you have extra funds available and want to pay your bill early to get a jump on the next month, your payment will be received as an additional payment and will reduce your balance, but unless you make another payment of the amount due before the due date, your account will be in default.
4 Fees and interest charges are variable
On a high interest savings account, the interest rate your savings earn is variable and you can only receive a fixed interest payment in a term deposit account. Similarly the interest rates charged on your credit card are subject to change, and while the banks are required to notify you of a change in interest rates, there is nothing you can do to stop the change. The fees on a credit card or transaction account are not fixed either and can change at any time, meaning an account with a reasonable annual fee can suddenly have a much higher fee than the competition.
5 Automatic reinvestment of term deposit
In the fine print of a term deposit account you may find that unless you specify to your term deposit provider in the specified time window what you want to do with your funds at maturity, they will automatically be reinvested. This can mean your entire principal and all of your interest earnings are rolled over into a new term deposit account, for the same term, at the new interest rate. The interest rate on your term may have been competitive when you opened the account, but during your term your provider could have changed their rates, and they could lock you into a term with a lower interest rate than you would have chosen. Most term deposit accounts will not change their fees of interest rates during your term, but look for the place in your fine print where this is spelt out, just to be sure.
Just because the banks are in the business of making money from your money, it doesn’t mean you can’t arm yourself with the information you need to beat them at their own game. It is possible to secure high savings account interest rates, avoid credit card interest rates and choose bank accounts with $0 fees so your money works harder for you, not for your bank.
Alban is a personal finance writer. He helps people to compare and choose the best credit cards online
Comments
One Response to “5 Details Your Banker Will Avoid to Mention”
Leave a Reply
Personal Finance Buzz…
Your story was featured in Personal Finance Buzz! Please visit and promote your article….