Tricks credit card companies play: Seven to watch out for
Filed under: Borrowing, Cards, Debt, Saving, The Dolans
Folks, we might have a new winner in the contest for the most hated consumer industry. For years, the hands-down winner was car dealers.
But we think that credit card companies are giving them a serious run for their money!
Most credit card companies are downright ingenious when it comes to cooking up sneaky new credit card fees and dirty tricks that take more money out of your pocket. If you've had enough, keep reading because today we are going to reveal seven of the industry's dirtiest tricks. We hope this list will help you protect yourself, slash your costs and be credit card smart.
Dirty Trick #1: Say "Bye-Bye" to Your Grace Period
No grace period means that you'll start accruing interest the moment you charge something. That can cost you a bundle of "extra" interest.
Most credit card issuers have already reduced their grace period from 25 days to 20 days. Many others have eliminated the grace period altogether. Now they are coming up with more and more reasons to take away your grace period. Miss a payment? Stop carrying a balance? Bye-bye grace period!
Dirty Trick #2: Punishing you when you are credit smart.
If you want to see my beautiful wife throw a complete fit, just mention any of these scandalous fees in her presence! These fees are the lowest of the low because they penalize you for being a responsible credit card user.
Some of the biggest offenders include charging you a fee for:
- Closing your account
- Failing to use a card for a period of time (such as six months or a year)
- Not carrying a balance (how DARE you!)
- Every transaction each and every time that you use your card
If your card charges you any of these fees, it's time to look for a new card! Click here for our tips on how to find the best card for you.
Dirty Trick #3: Doing you the "favor" of sending you "convenience" checks.Credit cards often send you "convenience" checks so that you can write checks against your credit card account. Isn't that nice of them? Please!
DON'T do us any "favors"!
What they bury in the fine print is that these checks usually carry very high interest and fees -- even higher than regular credit card charges. Some cards also give you no grace period on convenience checks, so you start paying interest from the day you write the check! Shred these little "gifts" whenever they arrive.
Dirty Trick #4: Psst... Hey, buddy, want to skip a payment?In their infinite generosity (ha!), some cards will "invite" you to skip making a payment. This "helpful" offer, which sounds great at first blush, often comes after the holidays when your balance is big and your wallet is feeling stretched. DON'T DO IT!
Skipping that payment can lead to a host of trouble -- from a higher interest rate to possibly having to make extra payments in the future.
Are you starting to notice a pattern? You should be skeptical whenever your credit card company does something "nice" for you without you asking for it.
Dirty Trick #5: Lowering your minimum payment due.
Another way some cards try to jack up their profits and lure you deeper into debt is by lowering the minimum payment due on your balance. It used to be cards required a minimum monthly payment of about 4% of your balance, but many now require as little at 2%. Don't fall for it!
Going from a $40 payment to a $25 payment on a $2,500 balance means it will take you an extra 19 months to pay off the debt.
Dirty Trick #6: It's 5 o'clock... Do you know where your payment is?
We all know that our payment is due on a certain date or it's late, right? But a new twist being thrown into the mix is having your payment due by a certain time on the due date. If your payment is due at noon and gets processed at 12:01, you get socked with a late fee AND likely a higher interest rate.
Gimme a break! Carefully check your statement so you avoid this trap.
Dirty Trick #7: "Over the limit" fees
Credit cards charge you a hefty fee for going over your credit limit. Look, we don't have a problem with penalties for that. But now these fees have gotten excessive -- almost $40! Plus, credit card issuers don't exactly discourage you from going over your limit when they approve charges and balance transfers that put you over your max.
Dolan Smart Credit Moves
So there you have it: Seven tricks and traps you now know how to avoid. But credit card companies will keep dreaming up new ones. So here's the bottom line on how to protect yourself:
Don't sign on with a card until you have a list in writing of all fees that the company charges. You can find these in the small-print section of your credit card application. Or, if you apply online, you will have to agree to all of the terms and conditions as part of your sign up process. You can always call the company, too. Whether in print, online or on the phone, read carefully before you agree!
Also be sure to actually read any notices your credit card company sends you about changes to your card agreement. That's your chance to catch any changes before they come back to bite you.
For more tips on being credit smart and successfully managing your debt, visit Dolans.com.
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Reader Comments (Page 1 of 2)
5-03-2008 @ 9:03AM
Zackery German said...
Great comments and information. I watch my cards and here something else you can let me know about. One time I try to make two payments within one month and they said I had to wait at least two weeks before I could make that second payment. I know something was up with that.
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5-03-2008 @ 11:06AM
bren said...
good article we found out yrs ago with capital one credit cards that if posted late we would get charged late fees all the time we were told this by a supervisor!!!so we had to start mailing in payments extra early or express mail to avoid this problem. it was awful and costly. always look at your statement!!
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5-03-2008 @ 11:10AM
bren said...
not to mention extra fees at post office!!! it should be illegal and credit card companies can write much of this off i found out. credit is good if used properly but the credit card companies are unethical in some cases and rake americans over the coals!!! we were penalized on our mortgage with wells fargo yrs ago we bought a home sold it early and was charged 5000$ for selling early they were mad at us for selling early!!! werent going to make interest over 20 yrs!! thats where the govt should step in and stop them!!!! but if late they want to take your home!!! sad very sad!!!
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5-03-2008 @ 11:16AM
kittykat1 said...
Has anyone had any good experiences with a credit card company? Care to share?
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5-06-2008 @ 10:19AM
Christine Byrnes said...
I have a AAA charge card and I can go to any Bank of America branch and make the payment and get it posted the next day. I am never get late fees, because I found out that AAA is linked to Bank of America. Find out if your charge card is linked to any local bank, so you can pay there rather than taking a chance on mailing it too close to the due date.
5-11-2008 @ 6:47AM
Charles said...
Hi Kittykat1,
I use Chase with aol and have been with them for a very long time. One of the best ways in making payments that I have found is to have it on an automatic payment and set your date and the amount that you want to have removed from your acct each month to be applied to your balance owned. I realize that a lot of people are charge happy people and only pay the min balance due, well we all know that it will never be paid off at that rate. I only charge each month what I know I can pay off each month, in saying this I have set my payment amount at balance owed to be removed from my acct. I do not have a lot of money, its just controlled spending and the way things are going I hope everyone will watch and control their spending with credit card companies.
5-03-2008 @ 12:33PM
Jay Sturdivant said...
Another "unsolicited" tip to keep credit card companies from using unethical practices on late charges:
Always sign up to have the minimum payment drwan directly from your checking or savings account on the due date...In this manner, you cannot be counted late no matter when they choose to draw upon your account (hours or days)...There is a catch to this however; they may charge you a "returned check" charge if the required funds are not available from your account or the bank refuses the payment transfer...I was a Bank One card holder from 1986 to 2006...Although I had never missed a payment or been late on a payment in 20 continuous years, I realized my payment was due the day before I paid bills...I immediately made a payment by phone at a service charge of $14.96 one day late...My next bill raised my APR to 23.99%...I made a call to the department in charge of "customer loyalty" and was pretty sure we could work it out...I was informed by the customer service representative and her supervisor that there was nothing they could do to solve the problem...They did, however, offer to take a look at my account in six months to try to lower my APR to 13.99%...My current rate had been 8.99%...They also added insult to injury by reporting the late payment to my credit report...While they have since merged with one or more other institutions, it is incredibly difficult to attempt to get the matter resolved because I have to tell the same story over and over again to different representatives "who may be able to assist me"...Obviously, I have switched cards to a more credible fox with a seemingly smaller appetite...I'm 56 years old and have a reasonable knowledge of finance...Can you imagine what these lending institutions are doing to our children who may not be so savvy?...
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5-03-2008 @ 12:56PM
Brenda Clark said...
Another tip would be not to let you credit card company automatically increase the amount of your credit line as they frequently do without your request when you are a good customer. This practice will eventually lower your credit scores because companies that you apply for credit from look at the total availability of ready cash that you already have even if you don't use those cards.
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5-03-2008 @ 1:30PM
Margaret Dykes said...
OUR Governemnt is to blame for what is nothing but legalized loan sharking. I could write a book on the nightmare experiences I have had with these companies.
The entire credit card system in this country is responsible for the enormous debt we are all in--and good luck if you try to declare bankruptcy! An attorney I talked to said with the new laws, they might as well bring back debtors prison. It is so unfortunate that in this world we cannot rent a car, buy an airline ticket or make a hotel reservation without a credit card-and although our Government is well aware of this, they allow the companies to screw us every which way!
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5-06-2008 @ 10:38AM
therapist said...
OUR GOVERNMENT is to blame? Whatever happened to the old adage "Don't buy what you can't pay for". Buy only what you can pay in full for every month and you won't have any problems. These credit card companies are loaning you their money. They have the right to charge whatever they want for this priviledge. If you don't want to borrow you don't have to.
5-13-2008 @ 12:56AM
Kathryn said...
therapist said "Whatever happened to the old adage "Don't buy what you can't pay for".
Well, I'm beginning to think as my dad thought---everything in cash. Why should someone else make money off your money, or, as he said, "Money should not be a commodity!"
What really gets me is: Isn't usury illegal anymore? Isn't an APR of 20+ % usury?
What about I.D. theft and auto-shippers like that "Girls Gone Wild" Guy and charging a dollar to "see if your account is open?" They don't need to charge any money to see if your acct is open. And do you get your buck back? Noooooooooooo. And usually it's for a deal where AT LEAST 100,000+ people will sign up.
The robber barrons of the 21st century, eh?
Katie K.
5-08-2008 @ 11:54AM
Remie Wolf said...
You are so correct. Also wanted to mention the Banks taking advantage of us everyday. They hold deposits for up to 5 working days and process a check the very minute it is issued. Their NSF fees are outrageous. The average man/woman is better off paying cash for everything. Yeah Right!
5-03-2008 @ 4:50PM
je9tot said...
I'm learning fast, that it's wise to only have one
major credit card for everyone in our household.
Much easier to manage all the expenses &
have each person contribute his share of the monthly
payment.
Thank goodness for my bank debt card, I now spend
less than ever.
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5-03-2008 @ 7:39PM
oneopinion said...
It is actually a good idea to have two major credit cards. Banks are very skittish about multiple charges within a short period of time and will shut your card down on you without telling you. Let me explain...While traveling in London with my kids last year we went out for the afternoon. Within about two hours, we bought theatre tickets, a meal, some beads for about $20.00, a book for about $15.00 and I was ready to buy a Christmas ornament when my card was declined. Why? Multiple charges. No matter that the card has a $25,000 credit limit. I was stuck. I switched to one of my other cards and continued with our afternoon. Later, when I called the company they told me they had placed a "fraud watch" on my card because there had been multiple attempts to use the card. Who were they protecting? Themselves. Not me, because I have zero liability for fraudulent charges. So, don't put all your eggs in one basket. Have a main card and a spare. This has happened to me on more than one occasion and it has happened to my husband as well. Oh, and by the way, for you married folks, my husband and I have no joint cards. We each have our own cards in our own names--no sharing. If one of us has a problem with identity theft, the other one is good to go. We are not tangled up together except for a home mortgage. --A tax lawyer
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5-03-2008 @ 7:40PM
oneopinion said...
The single biggest things you can do are pay on time and NOT RUN A BALANCE. Interest on credit cards is not deductible and the rates are sky-high. If you cannot afford to pay for what you are charging within twenty days, do not buy it. Only run a balance for a true emergency (the furnace breaks, the roof springs a leak, etc.). No, a vacation is not an emergency. No, that cute pair of shoes is not an emergency. Be smart. Also, a word to the wise: two banks that in my opinion are banks you should avoid getting involved with are Bank of America and Capital One. Good luck, a tax lawyer
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5-03-2008 @ 8:47PM
oneopinion said...
If you can stand one more comment from me, I'd like to respond to a poster above who asked if anyone had had any good experiences with a credit card company? I'd like to say there are no good credit card companies. Bankers are not your friends. They will do anything and everything they can to make money. They are in the business of delivering to their bottom line and to their stockholders. Never, NEVER trust a bank. NEVER. Read the fine print and pick the card that works for you. In this household, we all pay off our balances every month so we have reward cards that suit our life-style. I have a 20 year old and a 17 year old. From the time I had them begin using credit--the older one applied and received credit in her own name at 18, the younger one is an authorized user on one of my cards--I have taught them DEBT IS DEATH. It's become quite a joke in our household, but I can't tell you how many clients I have with horror stories of credit cards. The seven tips in this article have been great--follow them. And when you're on the phone negotiating with customer service, be forceful. Tell them exactly what you expect them to do. Take off that late charge? Lower your interest rate? They want you as a customer. You're the one doing them a favor by bringing your business to them--not the reverse. I get crazy watching people get into trouble. Oh, and by the way, you know these---"get points fly with no black-outs?" A complete scam. I had a Capital One card for about a year, accumulated enough points for a ticket to Europe. Could have bought the ticket on the web for about $800.00. Gee, funny, but when I went to redeem on Capital One's site, the ticket was magically valued at over $1000.00. More points, more money. I realized that their tickets were not priced at fair market value, but were artificially inflated. Took me about one second to take the paltry cash alternative and cut the card in half. Be very wary consumers and remember--BANKS ARE NOT YOUR FRIENDS. Good luck, it's a war zone out there.
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5-09-2008 @ 9:40AM
blaster said...
??? why is 'bank of america' on your 'hit list'? i have been with bank of america since they were 'national westminster' & i have never had a problem with them. they were always helpful when & if there were any discrepancies & they even reversed a couple late fees that were actually my fault. they also don't have any of those 'teaser' rates on their credit cards.
my worst experiences have been with 'citibank' & 'bank one' aka 'first usa', whose customer service is all but non existent.
for me, it's all about customer service & how you get treated.
i personally would stay far far away from 'citigroup', 'bank one' 'first usa' based solely on my own experiences
with them.
5-07-2008 @ 12:27PM
Lynn Godden said...
Here is something to be especially Careful about=My daughter got married in 2000& there were so many seperate expenses that I did not notice they used a small forgotten card for $400 in flowers=It Got forgotten& 4years later a Scum Sucking Bottom Feeeding Lawyer bought that debt& sued me also charging$10,000 for his"legal Fees" Of course it was all legal Although Immoral=I had to pay the $10,000
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5-08-2008 @ 3:01PM
Tom said...
And then the fine print that says: We reserve the right to change any condition at any time for any reason without prior notice to the customer.
That means that though they promise you a whole year at 0% interest to get you to transfer a balance, a few months later they can change, and you are then paying a higher % interest.
This also means they seemingly can 'wheel and deal' as suits their betterment.
And WHERE is our goverment to protect us???
Thanks, Tom
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5-10-2008 @ 7:10PM
oneopinion said...
A poster asked why my negative view of Bank of America. My experience has been that they have absorbed so many other entities their own internal organization has been affected. I have personally experienced mistake after mistake and have dealt with mistakes made to others. They bounce problems around among their divisions (web, telephone, in person) making solutions difficult. Closed accounts have been magically reopened. Large cash deposits have somehow gone astray. And, in the case of my husband, they opened a $100,000 line of credit and a credit card in his name by confusing him with another customer. What a mess. They also engage in a particularly infuriating practice of not crediting deposits on the day they are made, offering the excuse that somehow the deposit wasn't "sent down." Interesting that they do this repeatedly on Friday afternoons. They then don't give the "overnight credit" the deposit deserves until Monday. Do that to millions of customers, you have a nice little float working for yourselves. I personally think they should be investigated.
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