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Sioux Falls, South Dakota, isn't typically mentioned in the same sentence as "booming metropolis" but that may be mistaken knowing one of the largest banks in the U.S. (Citigroup) has its headquarters there. Diving a bit deeper you can soon understand why.
Many national credit card issuers headquarter their operations in states that have lax usury laws, which allows banks to charge that states highest allowable interest rate to all of its national customers. It's no surprise that South Dakota sits near the top of the list with an interest rate cap of 36%.
With this in mind, The Motley Fool analysts Nathan Hamilton and Michael Douglass talk in the video below about three other credit card facts you may not have known.
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Michael Douglass: We were talking before we sat down about credit card facts. You had a few that frankly surprised me, so I figured let's talk about those a little bit. The first one: your credit card doesn't actually expire, but it's got the expiration date on it.
Nathan Hamilton: I know.
Douglass: So what's the deal there?
Hamilton: I always wondered this one until I actually started looking around and came across the information, but yeah, your credit card doesn't expire and here's the reason why it's there: first off, it's a close estimate of how long the plastic on your card, the magnetic strip is going to last.
Douglass: Kind of makes you wonder whether they should make driver's licenses expire quickly ...
Hamilton: Exactly.
Douglass: ... because mine is definitely like frayed pretty badly.
Hamilton: I think I have 10 years on my license, but yeah. Obviously, shorter with a credit card. The second part is to add an extra verification layer when you're not using the card in person. On the phone, merchants are going to ask you, "Okay, what's your expiration date as well?" It's not an official factor on the card that's going to say, "Okay, I've passed my expiration date. You can't use it," because you can.
Douglass: This crazy. Let's talk about the maximum liability for unauthorized use. Somebody uses your credit card without your knowledge, you can only be held to max $50 of that.
Hamilton: No matter what the amount, if they go ahead and over spend your credit card limit, if you've got $1,000 credit-
Douglass: Buy that island in the Caribbean, wherever.
Hamilton: 100,000 credit card limit, anything, if you can't put that on credit with the maximum liability, it's going to be $50, and why that is is because there's legislation that came out of the 2008 financial crisis, which was more consumer advantageous and one of those changes was to reduce that maximum liability, to give some more leeway to consumers in that case.
Douglass: Yeah, which is ... It gives me tremendous comfort, because credit card theft, identity theft, these are very much things that happen and so it's nice to know that there are good protections there.
Hamilton: In reality, when there is official credit card theft that is proven to be theft, your liability is zero dollars.
Douglass: Right.
Hamilton: Yup.
Douglass: But nice to know that no matter what, no more than 50. Let's also talk about direct mail. I've gotten plenty of credit card spam in my inbox.
Hamilton: As have I.
Douglass: I'm pretty sure literally everybody in the United States has gotten a ton of it. This blew my mind. Nearly four billion pieces of direct mail in 2015.
Hamilton: I wonder ... I would have to run the calculations, but I wonder how far that would span if you laid those end to end, if you really think about it.
Douglass: Four billion.
Hamilton: Four inches maybe each one, who knows, but yeah.
Douglass: Yeah, it's got to at least cover the United States.
Hamilton: Yeah.
Douglass: A couple times over.
Hamilton: If you look at it, OK, credit card issuers, that is a big way that they attract new members. There some advantages to it. Some offers coming by the mail would be good. Some won't, just a matter of doing your research, but definitely know if you are online, if you are searching around, if you are submitting your email address, anything you're likely going to be a target of some direct mailers and probably more than one.
Douglass: Yeah, and the important this when you get that piece of direct mail and it's got 50,000 point or 30,000 miles or whatever is to then go do your research. We've got a site here at fool.com, it's fool.com/creditcards, that is devoted specifically to helping give you that kind of side by side comparisons so you can understand one card versus another, one set of benefits versus another, what maybe, hopefully will make the best sense for you in your financial circumstances, so check us out there. Again, that's fool.com/creditcards, and we'll look forward to passing on more information there.
