1. Use pre-authorized debit (PAD)
Banks hate customers who pay off their credit cards every month so much they call them “free riders”, “free loaders” or “leeches”. You want to become one of those.
One way to stay ahead of the banks is to set-up Pre-Authorized Debits, where you automatically pay off your credit card bill every month from your checking account. You have a choice to pay the minimum payment, the entire balance or a fixed amount. If you pre-authorize payment of your credit card bill in full every month you’ll never pay interest or get into debt again! It’s a fail safe way to own a credit card – the ultimate bank beater.
2. Negotiate your interest rates
Believe it or not, credit card issuers are so afraid of default, they are more than willing to cut your interest rate if you carry a balance. Canadian issuers routinely cut interest rates by 50% from 19.99% to 11% or lower! Just give them a call, explain your situation and make your request – go ahead, surprise yourself.
3. The bank is on the hook for all fraud charges
If there’s ever an unauthorized charge on your credit card, your credit card issuer is liable for 100% of the charge – not you. Just call your issuer, identify the unauthorized charge, and it becomes their responsibility to deal with the merchant and investigate the fraud. In the meantime, the issuer will pay off the fraudulent charge.
That’s why credit cards are great to use online, or when travelling. Even if your card gets stolen, hacked, or used by the busboy from a restaurant on the other side of the world, it’s the issuer’s problem, not yours.
Just make sure not to write your pin down on your credit card, or your bank will have the right not to cover you for the fraud.
4. Put a block on your credit limit
It’s weird how banks give you a credit limit, but then allow you to exceed the limit, only to charge you a penalty fee of $25-$30 for doing so. Talk about a misnomer.
To avoid the situation, call your credit card issuer and ask for a “block” on your credit limit. This will give you a hard stop at your credit limit (a real limit), so you’ll avoid unwanted penalties and will also be forced to stay in budget!
5. Reduce your credit limit
We all love the flexibility of a large credit limit. The truth is, more people get in trouble because they spend to their limit, which is typically more than what people can afford to pay back in any given month or months.
Don’t be afraid to call your bank and cut your limit, so that it stays within your monthly budget. Obviously, make it large enough so you can pay for things like airline tickets and what not. But other than that, cut it to a range you know you’ll be comfortable with.
6. Transfer your balances to 0%
Banks hate when customers “rate surf.” If you have to carry a credit card balance, you’re far better off transferring your balance to a low balance transfer credit card.
All you have to do is apply for the balance transfer card, provide the name of the bank, the credit card number and the amount of the balance you want transferred in your application and the bank takes care of the rest!
When your promotional rate expires after 6, 10 or 12 months, find another card, rinse, wash repeat! While banks may charge a 1%–3% transfer fee, it still beats out the 19.99%–29.99% interest rates most people are paying. You could literally save thousands of dollars.
7. Churn your credit cards
Banks are aggressively pursuing new customers. So much so, that many offer free flights, free hotel nights, and free cash back to entice new customers to apply for their card.
The truth is, you might be better off taking advantage of the sign-up promotion, whether it’s for a ton of Aeroplan Miles or a hefty amount of cash back in the first 6 months, and then once the promotion is over, taking advantage of the next promotion. It’s called credit card churning, and it’s a strategy to substantially increase the amount of travel rewards and cash back you accrue.
NOTE: Credit card churning is only recommended for most stable credit cardholders should try it. It is certainly not a way to outrun debt.
8. Get your annual fee waived
Some of the best credit cards available have an annual fee. But did you know that many banks will waive the annual fee for their best customers? If you’re not a big spender you may find it difficult to get a free pass, but if you spend enough, credit card companies will do almost anything to keep you.
Give your credit card company a call and see what they can do for you. Worst-case scenario you might get a ‘no’, but remember: You miss 100% of the shots you never take!
9. Don’t carry a balance to improve your credit score
There is a misconception that in order to build a credit history, you have to maintain a credit card balance, i.e. go into debt. This is absolutely false.
You can just as easily get an 850 credit score by paying off your credit card balance monthly vs. paying the minimum balance – the only difference is the former is a hell of a lot cheaper. Banks have long let that myth fester because it’s extremely profitable for them – don’t be fooled – you’re always better off paying down your balance sooner rather than later. Always.
Bottom line, credit card companies have made it exceedingly easy for cardholders to get, and stay, in debt. That said, there are plenty of tools to help you beat out the convenience, temptations and traps laid out by the banks. Unlike the casinos, there actually is a way to beat the house, so use them when you can!
