Using a credit card to make purchases is straightforward, but understanding the ins and outs of how exactly they work can be more complicated.
On the back end, credit card issuers can take certain liberties that impact your cards' features. If you dig into the fine print, you'll find that card issuers generally mention they can make certain account decisions at their discretion. There are also unwritten liberties issuers can take, potentially in your favor. For instance, an issuer may be cooperative when you request lower interest rates, a higher credit limit or a switch to a different card entirely.
The more you understand your credit cards, the better you can navigate them.
Here are a few facts about credit cards that are good to know.
1. Some credit card terms can change with little if any warning
You may become accustomed to certain perks, rewards, fees or even interest rates over time, but those features can change — some more quickly than others. You’ll often find language supporting this in a card’s terms and conditions.
For significant changes — like increases to interest rates, fees and the minimum amount due — the card issuer generally must give notice 45 days in advance, according to the Consumer Financial Protection Bureau’s website. But benefits or rewards aren’t considered "significant," so changes to those can come at any time. (Many issuers will still send an email or written notification as a courtesy to cardholders.)
Variable interest rates change at a quicker pace than other features, as has been the case since the Federal Reserve began hiking interest rates to battle inflation.
“Folks didn’t realize that the rise in the federal interest rate applies to their credit card also,” says Martin Lynch, director of education at Cambridge Credit Counseling, a nonprofit credit counseling agency. “Variable rate cards incorporate those hikes usually within a month or two, so you did see some people experiencing some sticker shock when the minimum payments went up.”
2. Issuers can close an account or cut your credit limit at any time
Even if you’re managing a credit card responsibly, an issuer can still legally close your account if it wants to, according to the CFPB website.
Credit card issuers can also increase or decrease your credit limit at any time.
The issuer must provide an “adverse action notice” when it makes these kinds of unfavorable decisions, the website notes. But they can still catch you off guard.
3. Your creditor may be willing to bend on interest rates
For longtime customers with solid track records, an issuer might be willing to negotiate a lower interest rate. Alternately, a hardship plan (if available) can temporarily lower interest rates if the hardship is because of qualifying circ*mstances beyond your control.
If you're having trouble juggling debt, credit card issuers may also be willing to work with you through a nonprofit credit counseling agency’s debt management plan, which can consolidate those debts into one fixed monthly payment if you qualify.
“Our average interest rate right now is about 8%, among all creditors,” Lynch says. “Some are higher, some are lower.”
For comparison, the average rate for credit cards that assessed interest in the last quarter of 2023 was 22.75%, according to Fed data.
4. You might not qualify for a sign-up bonus
Many credit cards offer an upfront pile of cash back, points or miles as an incentive for new cardholders who can meet a specific spending requirement. But if you’ve recently applied for a credit card with the same issuer — even if it’s been more than a year — you might not qualify for the advertised bonus.
As you’re applying for a credit card, it’s important to read the terms carefully to understand whether you're eligible for such a welcome offer.
5. You can lose a 0% APR
If you have good or excellent credit (credit scores of 690 or higher), you might qualify for a credit card with a 0% introductory APR on purchases, balance transfers or both. But that promotional window may not be guaranteed.
If you pay late, for instance, the issuer could cancel the 0% APR offer and start charging the card’s ongoing variable interest rate instead. Depending on the card, a much higher penalty APR can also apply after missing a payment.
To avoid missing payments, set a reminder or establish an automatic payment schedule.
6. You might be able to upgrade or downgrade your credit card
If a credit card is no longer as valuable to you as it once was, contact the issuer to see whether it’s possible to upgrade or downgrade your credit card to a different option. This is also known as a "product change," and it may allow you to retain your account number and account history while switching to a card that better suits your needs now.
You might consider downgrading to a different option to avoid an annual fee, for example. An upgrade might get you higher rewards or better perks.
7. The value of your rewards may vary
It's not really an issue for cash-back credit cards, but if you have a co-branded store card or travel card, be aware that the points or miles that you're earning may be less valuable for some redemptions than for others.
For example, your miles may be worth a penny or more each when redeemed for travel, but a good bit less than that when you redeem for options like cash back, statement credit or gift cards.
Knowing the true value of your rewards can help you maximize them. You can often get an idea of that value either by logging into your card account and exploring redemption options or by revisiting the card’s terms and conditions.
