Shocking Credit Card Facts 90% of Americans Don't Know During a much-needed break from work, I struck up a conversation with a colleague. It started out as your typical workplace conversation, but I could sense that something was weighing...

During a much-needed break from work, I struck up a conversation with a colleague. It started out as your typical workplace conversation, but I could sense that something was weighing on her mind. So, I asked her what was going on.

It turns out that while she was reviewing her bills, she spotted a rather distressing fact about her credit card.

Like so many of us, she assumed that whenever you use your credit card to make a purchase, interest doesn't kick in until 30 days later. Nope. The credit card determines when the interest starts. So, for her and using a Chase credit card, it was 21 days. Some are 7 days, others are 21 and a few are 30 days.

Why did this bug her so much? Well, she's been carrying a $2,000 balance on her card. And, because of the terms of her credit card company, she'd been 9 days of 21% interest each and every month. As a result, she'd been wasting $100s every year just on interest.

Yeah. I'm sure that's something that a credit card company definitely wouldn't want to disclose.

Why should this anecdote concern you? Well, there were 365 million open credit card accounts in the U.S. as of the end of 2020. Or, to put that another way, 79% of consumers own at least one credit card or charge card, which is the highest percentage in the Survey of Consumer Payment Choice since the Fed first began conducting it in 2008.

So, if you're reading this, then you probably have at least one credit card. And, if you do, then you should be aware of these 30 shocking credit card facts you don't know if you want to save time and money.

1. Credit Reports vs. credit scores.

While closely related and used interchangeably, credit reports and credit scores are in fact two different concepts. Your credit report consists of a list of the transactions that have affected your creditworthiness. Bill payments and loan applications, including divorce petitions, comprise the latter.

Credit bureaus then collect and analyze all that information and assign a grade. The result? Your credit score. Overall, this score is a good indicator of how well you manage your finances, which is essential to know before you go house hunting or looking for a new car.

FYI, in 2020 FICO changed its scoring model. As a result, this could negatively affect consumers who depended on such loans to repay debt.

"Those consumers with recent delinquency or high utilization are likely going to see a downward shift, and depending on the severity and recency of the delinquency it could be significant," Dave Shellenberger, FICO VP of product management, told CNBC.

Approximately 110 million consumers' credit scores will change because of the new model. There will be an upward shift of over 20 points for approximately 40 million consumers and a downward shift for another 40 million.

"This isn't consumer-unfriendly," John Ulzheimer, an expert on credit scores and credit scoring, told CNBC Select. "People with good credit are going to score higher with newer models. People who have elevated risk are going to score lower. That's always what you see in a newly developed model when you compare score distributions to older models."

2. Your credit score is based on five core factors.

Speaking of FICO, these scores are determined by five factors that all contribute to your final score. It's important to keep these factors in mind when applying for and using your credit card. When you don't know such facts, myths like carrying a balance can actually damage your score and result in unnecessary debt.

Your score is influenced by the following factors:

• 35% – Payment history. Payment history plays a major role in your credit score. A negative credit score is caused by late or missed payments. Your score will improve if you make all your future payments on time.
• 30% – Credit utilization. The credit utilization factor has the second-largest impact on your credit score. It is based on the amount of credit you're using compared to your total credit limit. In general, the lower the credit utilization ratio, the better the credit score.
• 15% – Length of credit history. While your credit history has a smaller impact on your credit score, it still matters. Major credit bureaus have a better understanding of what your past transactions have been like if your credit history is longer. Thus, they can make predictions about how you will handle your credit and your risk level.
• 10% – Inquiries and new credit. You are also penalized if you request your credit report more than once. Multiple hard inquiries will adversely affect your credit report. Short-term inquiries, however, will have less impact. The reason for this is that credit bureaus understand that this can happen in some instances, like when car shopping.
• 10% – Diversification of credit. This last factor affects your credit score because it reflects the diversity of your credit types. Credit portfolio diversity is beneficial to your credit score because it shows your ability to manage different types of credit successfully.

3. Interest rates on credit cards can fluctuate.

So, you're pretty amped about that new, shiny piece of plastic with a low APR. I hate to be the bearer of bad news, but credit card issuers can hike interest rates at will.

Federally chartered banks, which are the top ten credit card issuers, are free to charge as much interest as they want since they do not need to follow state laws that limit rates.

The CARD Act, or the Credit Card Accountability, Responsibility and Disclosure Act, protects your interest rates only for the first year — or six months, if it's a teaser rate. Furthermore, you lose this protection if you're 60 days late with a payment.

Also, the variable rate on most credit cards is based on an index and is therefore subject to change if the index rises. And, it doesn't mean that your fixed-rate credit card will remain fixed forever even if it does today.

Moreover, your card issuer can change your rate calculation. Basically, a fixed-rate card could be converted to a variable-rate card sometime in the future,

However, according to the CARD Act, interest rate hikes only impact new purchases — current balances will remain at the old rate. In addition, the issuer must notify you 45 days in advance.

Furthermore, your higher rate might not last forever. For example, let's say you missed a payment or it was late. In turn, your issuer raised your rate. But, once you get back on track, the rate could decrease.

Your account must be reviewed by the issuer after six months, according to the CARD Act. As a reward for your good behavior, the issuer may reset your APR to your previous rate.

4. There's a card you've never heard of.

It's not uncommon for people to misuse their credit cards and end up buried in debt. One way you might be able to climb out of this? Opening up a balance transfer card.

With a balance transfer card, credit cardholders can transfer their entire balance to one card with an introductory APR of 0 percent for 12 months, 15 months, or 18 months. Essentially, this is your "Get out of jail free" card to help you chip away at your debt without incurring overwhelming interest.

You need to be cautious, though, with these cards Often, APRs do not apply to new purchases, meaning these will accumulate at a much higher rate. Also, upon the expiration of the introductory offer, your balance will change to that rate as well.

And, if you're curious, these interest rates can range up to a whopping 29.99 percent.

5. Before you even apply for a credit card, everything is negotiable.

"You can ask for a lower APR, change your due date so it works better with your cash flow, and even requests that a late payment be removed from your issuer's report to the credit bureaus," Beverly Harzog writes on Clark.com. "You don't always get what you ask for, but it usually doesn't hurt to ask."

"When could it hurt? " she asks. A credit issuer may worry that you are becoming a risk if you request a credit limit increase with a low credit score. If this occurs, your credit limit may be reduced. Make sure you have a good to excellent credit score before you attempt to obtain better terms, Harzog advises.

You can use your credit card offers against each other if you receive several in the mail. "Let's say the offer for Card A carries a 12.99% APR on purchases and a $95 annual fee," she adds. "And let's say that the offer for Card B is a 15.99% APR with a $95 fee, but that fee is waived for the first year."

Contact the issuer of Card B with both letters and ask him or her if you can get a 12.99% APR – the same as the offer from Card A. Also, ask for the fee to be waived for two years. There's a good chance you'll get a better credit card deal than the one you received in the mail, even if you don't get everything you want.

6. Be a deadbeat.

I don't have evidence to back this up. But, I strongly believe that when it comes to debt, we're more like the Lainsters from "Game of Thrones" in that we repay what we owe.

So, why would you want to be a deadbeat instead?

"The reason you want to be a credit card deadbeat is simple: because not being a deadbeat is costly," explains LaToya Irby over at The Balance. "Being a deadbeat allows you to escape potentially expensive finance charges on your credit card balance."

"Suppose you have a credit card balance of $5,000 with an interest rate of 15%," she continues. Instead of paying the balance in full every month, you send $200 every month. In two and a half years, when you pay off the balance, you will have paid $1,033 in interest by the time you haven't added anything else to the account.

"That's 20% of the original balance," adds Irby. "If you'd continued making charges on the credit card rather than paying off the balance, your interest charges would be a lot higher." And if you'd paid the only the minimum payment (which decreases as you pay off your balance), you'd pay over $2,000 in interest by the time you paid off your credit card.

In other words, when you're responsible with your credit card and don't carry a balance, they aren't making money off of you. As such, you're considered a deadbeat to them.

7. There is no expiration date on your credit card.

I understand that your card specifies that it's valid until the expiration date has passed. But you can still use it after that date. You know, have you ever noticed how the number on your replacement card is the same?

So, what's the point of an expiration date?

First, it gives your credit card issuer an estimate of the life of your card, as well as the date when a new card will be sent. Secondly, it's needed for online or over-the-phone purchases. Since the merchant can't see the card, they can confirm ownership and possession simply by asking for the expiration date.

8. Think twice before canceling your credit card.

Canceling a credit card is often thought to be good for your credit score. But this isn't true.

"If you've been told that you can build your credit by closing old accounts, you've been sold some snake oil," Todd Christensen, an accredited financial counselor and education manager with Debt Reduction Services, a non-profit debt counseling agency told Time. "Generally, closing old accounts will lower your credit score, especially if you have a low balance," he explains.

Close your credit card account after taking into account the card's age. Closing one of your oldest credit cards will reduce the average age of your credit history, which will adversely affect your credit score.

Reducing your available credit may also impact your credit utilization. "Closing a card will generally lower your utilization rate, which means your credit score will suffer," said Christensen. "By how much depends on how much credit you already have and the balance that is on that account."

There are some exceptions, however. For one, if the terms of the card have changed, like reducing benefits, you might want to cancel the card The same is true if you rarely use a credit card with a pricey annual fee.

9. A higher number of credit cards can negatively affect your credit score.

It's good to have a variety of credit cards. At the same time, opening too many will raise a red flag.

Whenever you apply for a new card, you're doing a "hard inquiry" and your credit score will be affected. Retailers are constantly tempting consumers with discounts if they open a credit card, but make sure you know what is going on and how it will impact you.

With that said, keep your old credit cards open if you open a new one. Why? Closing old credit cards will decrease your credit history. In turn, this will deplete your credit score.

10. Negative credit items will eventually come off your credit report.

Due to the Fair Credit Reporting Act, most negative items will remain on your report for at most seven years. On the other hand, bankruptcy can last up to ten years or more.

11. A change in interest rates can be refused.

The CARD Act gives you the right to say "thanks, but no thanks" to an increase in your credit card interest rate. You might even be able to keep your old interest rate if the company strikes a deal with you.

Bonus tip: Make sure you get that in writing.

On the flip side, the issuer may just as well reduce your credit line, jack up your minimum payment, or even close your credit card account. The issuer cannot, however, demand that the entire bill be paid immediately. And. you have at least five years to pay off your debt if you refuse the new rate.

12. You don't have to show your ID.

I'm sure we've all had this experience at least once. You're either at the register or handing your card to pay your restaurant tab. You're then asked to show them your ID. Here's the thing. Unless you specify this on your card, you don't have to do this.

In fact, for MasterCard and Visa, merchants cannot request ID to accept a signed credit card.

According to Visa: "Although Visa rules do not preclude merchants from asking for cardholder ID, merchants cannot make an ID a condition of acceptance. Therefore, merchants cannot refuse to complete a purchase transaction because a cardholder refuses to provide ID. Visa believes merchants should not ask for ID as part of their regular card-accepting procedures."

Nevertheless, if the merchant does not see your signature on the card, they are allowed to ask for your ID and sign your card before accepting it.

13. The 45-day notice you receive when your APR rises are misleading.

"The Credit CARD Act of 2009 gave consumers some much-needed protection," says Harzog. "If a credit card issuer makes a major change in terms, such as raising your APR, federal law now requires the company to give you 45 days' notice."

In reality, however, you have 45 days before you must pay the extra interest accrued at the higher rate. However, you will start to accrue interest just 14 days after you receive the notice at the new higher rate. As a result, your account starts accruing interest on new purchases on the 15th day after the postmark date. "You just don't have to pay it until 45 days has passed," she explains.

Believe it or not, this is absolutely legal. Unfortunately, it won't be made clear to you. "If you get notice of an APR increase, look at the postmark date so you know when the new rate takes effect — and consider any new purchases carefully since you now have a higher APR," Harzog advises.

14. You were acquired by credit card companies for around $80.

According to a report by the Database Marketing Institute, credit card companies spend on average $80 in marketing and administrative costs for every new customer.

As long as customers keep their cards, credit card companies are fine. Why? Customers return on average $120 per year. However, if you don't use that card, the issuer will lose that $80.

15. Almost one-quarter of Americans believe it will take 2 years or more to pay off their credit card debt.

"Although 59% of Americans believe they will be able to pay off all of their credit card debt at some point in the next six months, a good portion thinks it will take two years or longer," writes Gabrielle Olya for GOBankingRates. "Thirteen percent believe it will take a couple of years, 8% believe they will be able to pay off their debt within five years and 2% believe they will never pay it off."

16. Majority of lenders use FICO scores when making decisions.

The FICO credit scoring system was developed by Earl Isaac and Bill Fair in 1956 to assist lenders in making well-informed lending decisions. There are three major bureaus that contribute to FICO's score: TransUnion, Equifax, and Experian. These are sometimes referred to as the "Big Three."

In 90% of cases, lenders consider your FICO score when making loans. Recently, the "Big Three" joined forces to create VantageScore, a FICO competitor.

Moreover, credit bureaus only collect and assign scores to data. The decision about whether or not your score meets a lender's requirements rests with them. Therefore, there is no secret list for everyone to consult. The reason you keep getting rejected is because you've blacklisted yourself.

17. Purchases made with your credit card are protected.

What happens when make an online purchase, but it never arrives on your doorstep? Perhaps a charge appears on your bill that you did not authorize. Have no fear. Your credit card has you covered.

Certain credit card rights provide powerful protection for consumers.

Generally, credit card companies assume no liability for unauthorized purchases on stolen or lost cards, as federal law limits liability to $50. However, if you notify the company before your credit card is used, you won't be held responsible for any unauthorized charges.

A credit card holder may also request a refund from their credit card provider for an unsatisfactory purchase under the Fair Credit Billing Act. Purchases must be made within 100 miles of your home at a cost of at least $50. The seller must have been contacted first in an attempt to resolve the issue.

Other than federal rights, some cards offer return protection, protection from lost or damaged merchandise,, or extended warranties. See if your card offers any protections by checking its terms and conditions. You may be able to save hundreds or even thousands of dollars if you know these lesser-known details.

18. According to the Credit CARD Act of 2009, grace periods are not required.

A grace period, for those of you who may not be aware of the term, allows you to pay your bills on time and avoid paying interest. This period typically ranges between 21 and 25 days.

"The CARD Act does not require credit card companies to have grace periods on their cards," clarifies Harzog. "But if the card issuer decides to offer a grace period, the CARD Act requires that it be at least 21 days." Most major credit cards do not have grace periods, but you should note the length of the grace period on each card.

When considering credit cards, read the fine print and make sure the cards you're thinking about have a grace period. Once your purchases appear on your account, you will begin accruing interest on them.

19. More than half of Americans carry a balance on their credit cards every month.

Inside 1031 found that credit card debt rapidly grows for those who aren't able to pay the balance off in full – most Americans included.

There are some Americans who carry a monthly credit card balance for years: 40% report that they have not been debt-free since before 2018 – and 15% report carrying a monthly balance since before 2006 (more than 15 years ago).

20. Credit scores come in many forms.

Each credit bureau reports credit scores differently. There are small differences in the information about your credit history among the major credit bureaus as well.

In other words, these three as well as other credit reporting agencies report to lenders several FICO credit scores based on the information they collect.

Additionally, different scores are assigned to specific industries. In contrast to mortgage lenders, auto lenders review different risk factors, so their scores are different. Regardless, the five credit scoring factors from the start of this article are the most important to abide by, regardless of how confusing they might be.

21. The bogus chargeback restriction.

Typically, a chargeback occurs when a merchant returns money to a consumer, a move forced by the issuing bank for the tool (credit card, debit card, etc.) to settle the debt. A few circumstances can lead to consumers requesting a chargeback in the US, including:

• According to the customer, the items purchased were never delivered as promised
• The customer claims that the purchase was not authorized or that there was identity theft
• Consumers were either incorrectly charged, did not receive a refund that was supposed to happen, or were billed twice
• An error occurred during the banking process, insufficient funds, or an authorization expired

You might receive a receipt that states that you have agreed to give up your chargeback rights against the merchant at any time. These claims can be reported as bogus on receipts, and merchants can be held liable.

22. Insuring credit cards against payment fraud is a waste of money.

"You've probably gotten phone calls or mail about this type of insurance," says Harzog. "I'm all for insurance when it comes to my health, car, house, and things like that." The difference is, health insurance actually pays off when you need it, so you aren't wasting money on premiums, she explains.

You may be able to stop making monthly payments on your credit card balance for a brief period of time if something unfortunate like losing your job happens. The policies, however, have many exclusions, so they're not as valuable as they claim.

The cost is also high. For every $100 of your statement balance, you'll have to pay $0.89. Suppose you have a $1,800 monthly balance. You pay $16.02 each month for insurance. You will end up paying $192.24 over the course of a year if you keep the balance around the same amount, Harzog states. In addition, you might not be able to use the insurance.

23. Most states prohibit standard credit card interest rates.

"Usury law sets a limit on the amount of interest that can be charged on different kinds of loans," explains Raychelle Heath for Bankrate. "Most states have usury laws, however, national banks can charge the highest interest rate allowed in the bank's home state—not the cardholder's," she adds. This is because in 1978, the Supreme Court ruled that state usury laws do not apply to national banks as a result of the Marquette National Bank of Minneapolis vs. First of Omaha Services Corp. ruling.

You may live in Arkansas, where the maximum interest rate is 17 percent, but your card issuer can charge you a higher amount if its headquarters are in another state, where the maximum interest rate is higher," says Heath. In states without usury laws like Maine, where your issuer is located, you have even less protection.

In a nutshell, usury refers to lending money at an astronomical interest rate. States have different approaches to usury laws. So, be aware of this if you're carrying a balance and then explore options to fight back. For example, transferring your balance to a card with a lower rate.

24. Credit card companies place their headquarters in states with lax usury laws.

Following the aforementioned Supreme Court ruling in the Marquette National Bank of Minneapolis vs. First of Omaha Services Corp case, banks were allowed to charge their customers the interest rates allowed within the states where the banks had their headquarters.

It's no secret what happened as a result of this ruling.

Credit card companies relocated to states with incredibly generous usury laws. This is why Capital One is headquartered in Virginia (no interest rate cap), and Bank of America, Chase, Discover, and Barclay's are headquartered in Delaware (no interest rate cap).

25. Credit card balances aren't always black and white.

Credit card usage is best achieved by paying off your card in full each month. The other part of the equation? Maintaining a low credit utilization ratio — or your percentage of your total credit limit used.

In short, make it a priority to never carry a balance by paying your bills in full before the due date. When you do, you'll be able to successfully build and maintain good credit.

Unfortunately, your credit report may not convey that to lenders. What's up with that?

Generally, credit card companies notify you of your payment due date a few days or even weeks after the end of your billing cycle, which can be unreliable. As the billing cycle closes, the amount you owe on your credit report will be reflected if you have not paid your bill yet. In the event that the amount is large, usually more than 30 percent of your credit limit, it will seriously affect your credit rating.

Providing you pay your card in full and report the charge during the next billing cycle, this can be a minor inconvenience. On the other hand, if you're planning to apply for a big loan, such as a mortgage, your credit report might reveal an unexpectedly high credit card balance.

For this reason, you should always be cognizant of your credit card balance is. And, always pay it off as soon as the transactions post.

26. The cost of cash advances is high.

"The APR and transaction fees for cash advances are stated pretty clearly in the Schumer Box for each credit card," notes Harzog. "But you'll have to read the fine print to find out that there's no grace period for a cash advance."

And, things only get worse from there.

"You'll usually pay a higher APR for a cash advance than you would for purchases, plus there's usually a 3% to 5% transaction fee," she explains. "The APRs can be 25% or more and the interest starts accruing right away". Thus, if you borrowed $2,000 on a credit card, it will cost you 25% interest plus a $100 transaction fee!

Who is the winner in this situation? "The credit card company wins hands down." The issuer often makes interest off your balance for an indefinite period of time when you get a cash advance.

So, when it comes to taking out a cash advance, do the opposite of Nike and don't do it.

27. Your credit score can cost you money.

A low credit score indicates a high risk for lenders. Because of this, you'll most likely have a hard time finding a lender and end up paying a high-interest rate. In response, people tend to spend time and effort on repairing their credit. In the event that you take out a mortgage when your credit score is low, though, this may accumulate over time.

Among other things, a low credit score can affect:

• Getting an auto loan
• Obtaining a mortgage
• Being able to rent an apartment
• Applying for other credit cards.

28. Late payments have an impact.

If you pay after the due date, your statement is late. Therefore, you may be charged a late fee by your credit card company — the average late fee is $36. Does that mean your credit rating is also damaged?

Not at all. As per credit bureau reporting guidelines, your issuer cannot report a late account to the credit bureaus until it is 30 days past the due date. Moreover, the CARD Act states your rate can't be raised unless you're 60 days or more behind on your payments.

The CARD Act excludes issuers from setting midday deadlines for payment. The deadline for payments is 5 p.m. on the day the bill is due.

You need to receive the bill from your issuer 21 days prior to the due date for payment. It must also be due at the same time each month.

29. Many credit reports contain inaccurate credit information.

Approximately one in five people have an error on one or more of their credit reports, according to the Federal Trade Commission. That's why you should check your credit reports frequently and dispute any inaccurate details. Incorrect information will negatively affect your credit score. When you make a late payment, for example, your score will drop because 30% of your credit score is based on your payment history.

So that you know exactly how different factors affect your credit score, you need to know your credit facts. The first thing that should be learned is how to read your credit report so you can spot irregularities and make sure that the information is correct.

When you have analyzed your credit report, you can consider other ways to improve it, such as paying late or past due accounts, so you can increase your credit score.

30. Credit card issuers might pay to keep you.

One of my best friends has been able to keep his introductory cable and internet rate for years. He's even been able to get premium content, like HBO and Netflix, thrown for free. How? Because whenever the rate goes up, he calls his provider and threatens to leave.

You actually might be able to pull this off with your credit card company as well.

It's possible the card issuer will offer an incentive to entice you to keep your account if you call to say you are considering canceling the card due to the annual fee or rewards not working for you. The issuer may even waive or reduce your annual fee or offer statement credits or bonus points.

The guarantee is not absolute. Retention offers are generally generous at some issuers, while they are rare at others. Also, card issuers are more likely to try and keep cardholders who regularly use their cards.

At the same time, there's no harm in calling and asking one way or another. However, if you've already decided to close the card, make sure you don't mention it. If you do, an agent may just go ahead and assist you in closing the account.

Frequently Asked Questions About Credit Cards

What is a credit card and how do they differ from debit cards?

Credit cards allow you to borrow money from a credit card company. However, you will have to pay a percentage of interest (referred to as an APR) at the end of each billing cycle on any outstanding debt.

By using a debit card, you can draw money directly from your bank account. Most debit card and prepaid card issuers do not report your credit history to credit bureaus, unlike credit card issuers.

What does a credit limit mean?

The credit limit is the maximum amount you can charge to a credit card before you have to pay a penalty. Line of credit, credit line, and spending limit are all terms used when referring to a credit limit. However you refer to it, the more credit you have available to you, the higher your limit will be.

How do I apply for a credit card?

The process of applying for a credit card is quite easy. It's getting one approved that's the tricky part. While there's no way to guarantee you'll get approved for a credit card, you can increase your chances of getting one by following some tips before you apply.

Filling out an application should take less than five minutes. Legal names, birth dates, addresses, Social Security numbers, and your income are generally required. When you provide your Social Security number, the issuer can check your credit, which largely determines whether you'll be approved. Your income is also a major factor in determining how much credit you should be approved for and whether or not you can pay off a credit card bill.

Why does the APR go up when you're making payments on time?

Despite being up-to-date on all payments, your Annual Percentage Rate (APR) may go up for a few reasons. A change in your credit score, the end of a card-related promotion, or a change in your variable-rate card's prime rate are some examples.

Is it harmful to pay off your card balance before the billing cycle ends?

It's not harmful to pay off your balances early, and you can even boost your credit score in the process.

How so? If you make payment early before the card issuer reports your balance to the credit bureaus, you can reduce that amount. This will also result in a lower credit utilization rate. And, your credit score may improve as a result.

Your account history and length of on-time payments will continue to work in your favor when building your credit score, even if there are no $0 balances reported to the credit bureaus at the end of the month. In order to avoid accruing expensive interest, it's important to keep up with payments. You won't have a problem paying your bill on time if you make sure to do so.

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