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10 Credit Card Rules You Should Know by Heart

Author: Matthew Frankel / Source: The Motley Fool

When it comes to credit cards, as with any other area of personal finance, the more informed you are, the better equipped you’ll be to make smart decisions. With that in mind, here are 10 principles that all consumers who have, or are planning to get, credit cards should be aware of.

1. You don’t need good credit to get a credit card with reasonable costs

If you have poor credit, or are just starting to establish credit, there are “bad credit” credit card products designed for you. The problem is that they tend to be very expensive.

Image source: Getty Images.

A better choice is known as a secured credit card. A secured card works just like a standard credit card, except you’re required to make a deposit equal to the card’s credit limit. Because you’re pledging this deposit as collateral, secured cards tend to have interest rates and fees comparable with standard credit cards.

2. Your cash advance APR can be much higher

Many credit card holders are unaware of this, but the APR you’re charged on purchases and the APR you pay for cash advances are often two very different things. Just taking a quick look at one of my own credit cards, my purchase APR is 17.99%, while my cash advance APR is a much-higher 25.99%. Next time you’re tempted to use your credit card for quick cash at an ATM, be sure you know how much it costs.

3. So can your “penalty APR”

Your credit card also is likely to have a higher “penalty APR,” which kicks in if you pay your bill late or exceed your credit limit. And the difference can be even more dramatic than with your cash advance APR. With my card that I referred to, my penalty APR is 29.99%, and it can be enforced for at least six months if I’m even a day late with my payment. Some credit cards have no late fees or penalty APR, and others do but will forgive a single late payment, so if you have a tendency to forget to pay your bill by the due date, it may be a good idea to look into a card that’s designed for those situations.

4. You might be surprised how much negotiating power you have

You have more room to negotiate with your credit card issuers than you may think. For example, 69% of customers who call and request a lower interest rate get it, as do 89% of people who ask for a higher limit, according to a report by Cardholders also have an 82% success rate when requesting annual fee waivers,…

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