Credit card companies make money when you pay them interest, late charges and all sorts of other fees. Let us look at 10 different ways that these companies may go about profiting of you.

1) Fees and rates on cash advance

Many people are unaware that the interest rate on cash advances is significantly higher than that on their purchases. Even if the card offers a zero or low interest on purchases for an introductory period, it often does not apply to cash advances. In addition to that, there are fees charged for making cash advances.

2) Fees for balance transfers

People make balance transfers in the hope of paying off their debts faster at a lower interest rate. What they usually do not know is that there are additional fees charged on the balance transfer. It is important to take the fees into consideration when weighing the pros and cons of making a balance transfer.

3) Zero or low interest for an introductory period

What starts out as a credit card that can make you much savings, can drive you deep in debt if not used correctly. This is due to the fact that the cards with low or no interest for an introductory period usually end up charging very high interest rates at the end of the introductory period. Typically, the interest rates are even higher than those that do not offer any special introductory offers. It is often a bait to get you hooked.

4) “Fixed rates”

Although you might hear the term “fixed rate” being used when signing for a credit card, a closer look at the credit card agreement may reveal otherwise. The term is loosely used to refer to the fact that rates may not drastically increase like those given during an introductory period. However, the credit card companies have the right to increase the rates as they deem within two weeks or so.

5) Universal default

Credit card companies that follow the policy of universal default have the right to check on your credit history regularly. If your credit history gets adversely affected because you run into problems in making payments of any other credit card bills or loan payments, these credit card companies are entitled to increasing your interest rates and fees charged on their cards. They can do this even if you have been making prompt payments on their cards.

6) Minimum payments

The minimum payment you are expected to make is a very small percentage of what you may owe the credit card company. Generally people stick to making these minimum payments. This way the payment is usually enough only to cover the interest. Principle amount often stays the same and you’ll be paying them for a long time.

7) Two-cycle billing

With this method of billing, interest is charged on your average daily balance over the past two months. That means that if you had carried any balance from the previous month, you do not get any grace period on your new purchases. This happens even if you had made the new purchase only after you’ve cleared your balance. Only when you have paid off your balance for two months in a row, you get to enjoy your grace period again.

8 ) Late payment fees

Late payment fees may seem insignificant. However, people tend to overlook their credit card payments more often than not. Each time it happens, you may be charged an average of $30 easily.

9) Payment allocation

You could have balances, new purchases and cash advances made on your card. When you make a monthly payment, the credit card company may allocate the payment in such a way that they make most money. For example, since they make most out of your cash advances, they may allocate you payment to your new purchases. That way, they can continue to make more from the interest charged on your cash advances.

10) Bait-and-switch

You may have been made an offer for a low interest credit card with a high credit limit. However, it is not guaranteed that you may receive the same card in your mail if you sign up for it. The credit card company may try to switch you to another card which may not offer such low interest or a high credit limit once you have been “baited” by their offer. It is up to you to call and cancel the card.

The credit card companies may employ various tactics in order to make profits for themselves. In spite of this, you can stay safe by making sure that you do an extensive research on the various cards in the market as well as on the companies. Most importantly, read your credit card agreement. Ask the salesperson about any clause that you may not be clear about. It is you who is going to have to pay for your choice. It is therefore, best that you make it a well-informed one.

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