A look at a typical cardholder agreement makes it clear that credit cards come with a lot of fine print. Still, much information is not available to cardholders, especially regarding what they can ask their card issuers and how they can manage their accounts more profitably.
A recent NerdWallet survey found significant gaps in consumers’ understanding of credit cards, gaps that can be costly.
“The act of using a credit card is very simple, but they can be complicated products,” says Sara Rathner, credit card expert at NerdWallet. “Knowing what your card offers and what you can order can make it significantly more valuable to you.”
Test your knowledge by answering the same quiz that is given to respondents.
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1. True or false:
Moving credit card debt to a card with a lower interest rate or a 0% rate will always save you money in the long run.
A balance transfer can help you pay off debt more quickly, but it’s not always the best option. Moving debt from one card to another typically incurs a fee of 3% to 5% of the amount transferred. That charge could be more than you would have paid in interest if you had left the balance where it was and paid it off. So you have to compare costs. A balance transfer is effective only if it saves you money overall, and you use the money you save to pay off your debt even faster.
Respondents who answered correctly: 22%.
2. True or false:
Credit card issuers allow you to request an increase in your credit limit.
You can always ask your card issuer for a higher limit, though there’s no guarantee you’ll get it. The issuer will consider several factors beyond your account registration, including your income, debt, and credit history.
Respondents who answered correctly: 76%.
3. True or false:
Credit card issuers allow you to request a lower interest rate.
Similar to looking for a higher limit, you can certainly ask your card issuer if you qualify for a lower rate. You may not get it, but it’s worth picking up the phone to ask, especially with an account in good standing. A lower interest rate means immediate savings if you normally carry a monthly balance.
“If your current card isn’t working for you, it might be worth calling and asking for the change you want,” says Rathner. “If you’re a long-time customer in good standing, the answer might be yes. But if it’s no, then you can vote with your wallet and find a card that best fits your needs right now.”
Respondents who answered correctly: fifty%.
4. True or false:
Credit card issuers make hardship plans available to anyone who has trouble making payments.
Some credit card issuers will temporarily reduce interest charges or waive fees through a financial hardship plan for cardholders who are unable to make payments due to circumstances beyond their control. For example, you might be eligible if you lost your job or had a family emergency.
But while some issuers offer emergency plans, they don’t make them available to everyone who requests them. You will have to qualify based on your circumstances. No one is guaranteed to be accepted.
Respondents who answered correctly: 18%.
5. True or false:
If you want to switch to a different card from the same company, for example to get a lower annual fee or better rewards, you should ask the company to close your original account and open a new one.
Switching cards from the same issuer is called product switching. Since issuers don’t widely announce product changes, it’s not surprising that many people don’t understand how they work.
If you’re not happy with your current credit card because of its fees, rewards, or other features, you can ask the issuer to switch the account to a different card that better suits your needs. You keep the same account; just have a new credit card attached. Keeping your account open can benefit your credit, as scoring models consider the length of your credit history, including the age of your accounts.
Respondents who answered correctly: 23%.
6. True or false:
Credit card issuers waive late fees.
Issuers don’t convey that they’ll consider waiving late fees, so it’s no surprise many people don’t know it’s an option. Not all issuers will waive fees. Those who waive them will do so at their discretion, and will consider it only upon request. It is not unusual for an issuer to waive the first late fee for an account in good standing. If granted, that represents a potential savings of up to $30.
Respondents who answered correctly: 37%.
7. True or false:
You can use a credit card without having to pay interest.
You will not be charged interest on purchases if you pay your credit card on time and in full each month. If you carry a balance from one month to the next, on the other hand, you’ll incur finance charges unless you have a 0% promotional APR period in effect.
Putting purchases on your card and paying the bill in full each month avoids interest while still getting the benefits of a credit card, like fraud protection, rewards and more.
Respondents who answered correctly: 54%.
8. True or false:
Making the minimum payment each month on a credit card allows you to pay off debt quickly.
Paying just the minimum on a credit card each month can take years to get out of debt. The minimum is usually enough to cover the interest accumulated during the last month, plus only a small fraction of the actual debt. Look at your credit card statement to see how long it would take at that rate. You’ll see a table that shows how long it would take you to pay off the balance if you only made the minimum payment.
Respondents who answered correctly: 64%.