Know the Rules If You’re Going to Play the Game

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It’s time to get it out in the open: Credit card companies are in it for the money. They are in business to make a profit. And it appears they are doing a bang-up job of it given information from Motley Fool that says card companies hauled in $176 billion in 2020. Wow. Imagine what that number will be for 2023.

If you own a credit card, you have chosen to participate in a kind of competition. And that’s OK, provided you know the rules of the game. It couldn’t hurt to study your competitor’s strategy.

Your opponent’s goal in this game is to develop you into a revolver—industry lingo for one who carries a balance from month to month. Credit card companies reluctantly tolerate those of us they call deadbeats—cardholders who always pay their balances in full and do not pay interest and fees. They hope that if we keep playing the game, eventually we'll trip up and turn into revolvers.

If your win-loss record in the credit card game is embarrassingly pathetic, it might be because—and forgive me for saying this—you are ignorant. I want to help you to learn how to play the game and get into shape so you can even the score.

Strategy: Know The Rules

Every credit card account has a specific set of rules about late fees (ouch!), over-limit fees (double ouch!!), grace period (you lose if it you carry a balance), billing methods, cash advances and so on. You can read them on the back of your monthly statement (look for small print, pale ink) or online. Now, do something you may have never done before: Read it.

If you don’t fully understand or if some rule is not disclosed on the statement, call customer service and let the robot know you need to speak with a human agent. Don’t be embarrassed to ask simple questions and don’t hang up until you are satisfied. Read your statement very carefully every month because the law allows your opponent to change the rules. Scrutinize every square millimeter and question anything you do not understand.

Strategy: Stop Fantasizing

Your credit card company doesn’t care about you. They want to win the game. When they increase your credit limit it’s not because you have achieved something noteworthy. They believe you respond well to flattery and they know how to pour it on. They want you to build your balance and pay only the minimum required payment each month.

Strategy: Don’t Be Late

If you pay your bills the old-fashioned way, always use the preprinted envelope provided in your statement and do not add staples, paper clips or cute sticky notes. That will put your payment into a special pile to be processed manually, and you do not want that. If you have a message to convey, call customer service or mail it in a separate envelope.

Take Capital One for example. The last time I checked, this Virginia-based credit card issuer sorts and processes up to 600,000 customer payments each day. That takes 300 employees and lots of machines. It’s not someone with a letter opener. Any number of things can happen to delay your check arriving in time and being processed in a timely manner. Remember you are depending on something called the mail to get it there, so allow for inevitable delays.

If you use online banking, set up automatic payment for your credit card account. Then, watch it like a hawk. Make sure the payment goes through and is credited before the time it is due. Don’t assume anything. If you are hesitating to go auto because you live so close to the edge you are nervous about not having enough in the account at that specific moment, see this as a red flag.

Strategy: Pay Early

If you carry a balance, making your monthly payment early in the billing cycle (even before the stated due date on the billing statement) will save you money. Why? Because most credit card issuers use the average daily balance method to figure monthly interest or finance charges. If you make your monthly payment early, you reduce the daily balance for more days in that cycle.