Cash is the way of the past. For several years now, plastic has slowly been taking the position as the leader on the payment front. Whether you love or hate them, the reality is you probably cant really do without a credit card in 2017. In fact, even back in 2012 nearly two-thirds of all in-person purchases were made using plastic, leaving only 27 percent to be made with cash.
With credit cards being everywhere with the capacity to purchase nearly anything, plastic is here to stay. So its important that you learn more about how these cards work and how you can best use them. Here are 7 surprising facts you may not have known about credit cards before.
1. Your credit card really doesnt expire.
Yes, your card has an expiration date on it, but you could actually still use the card beyond that date. If youve ever looked, the number of your replacement card is exactly the same. The expiry actually serves two purposes. It serves as an estimate of how long your card will last and provides your card issuer with a date to renew your card. And the date is used to verify purchases you make over the phone or online. Requesting the expiration date helps the merchant confirm that you really are the card owner.
2. Credit card carriers spend an average of $80 to secure you as a customer.
According to financial data collected by theDatabase Marketing Institute, card companies spend roughly $80 combined in marketing and administrative costs to ascertain each new customer. In return, most customers produce an ROI of $120 a year.
3. Standard interest rates on credit cards are illegal in most states.
Usury laws established within each state set amaximum interest rateany financial institution can charge. For example, Alabama has a cap of 6 percent, New York is 16 percentHowever, credit card companies find a loophole because national banks arent limited by state usury laws.
4. Credit card companies choose to locate their headquarters in states where usury laws are lenient.
The ruling by the Supreme Court in the Marquette National Bank of Minneapolis vs. First of Omaha Services Corp gave banks the ability to charge customers the rate in the state where their headquarters is located. Once the ruling was made, several credit card companies relocated their headquarters to states with extremely lenient usury laws. To name a few, Citibank settled in South Dakota with a 36 percent interest cap, Capital One moved to Virginia with no cap, and Bank of America is in Delaware also with no cap.
5. You are required to pay no more than $50 on any unauthorized account activity.
The Fair Credit Billing Act, known as FCBA, established a limit of $50 for a cardholders liability on unauthorized card use, regardless of the amount charged on the card. If the charges are made after you report the card stolen or missing, you are not even liable for the $50.
6. The initial digits of your card number identify the industry that issued it.
This numerical code is used for tracking purposes. For example, if your number begins with a 1 or 2, it was issued through an airline. The number 3 is designated for companies in travel and entertainment while numbers 4 and 5 are for financial institutions.
7. If your company raises your interest rate, you can say no.
As part of the Credit Card Accountability and Disclosure Act, you have the right to refuse an increase in your APR. If you choose to do so, request that your APR remain the same. If they agree, get the terms in writing. More often than not, your provider will lower your credit line, increase your monthly payments, or even just cancel the card. Even if your card is cancelled, you will have a minimum of 5 years to pay off the balance at the previous rate.
The economy is moving more and more toward plastic, so its important to start learning more about this payment method now. Understand these nuances of credit cards, and your finances will be better for it.