10 Credit Card Company Tricks To Beware
Are you smarter than a credit card company? They've got billions riding on their belief that you're not. Check out these 10 methods, via the Americans for Fairness in Lending, credit card companies use to make extra money off you that you may not even be aware of, knowledge that could save you hundreds in extra fees.
1. Fees and More Fees
On any given month, you might pay a late payment fee, overlimit fee, cash advance fee, balance transfer fee, foreign exchange fee, bill payment fee, Western Union fee, and whatever else your lender can devise. Not to mention monthly and annual fees.
2. Tricks to Make You Pay Late
These come in many varieties. If you’re late you’ll pay a hefty fee and your interest rate may go up. Check each statement carefully and pay your bill as soon as it arrives.
Changing Due Dates – Your bill will not be due on the same day every month.
Early Due Dates – Bills may be due just a few days after you receive them.
Weekend Due Dates – If your due date is on the weekend and your payment arrives on the date, it
won’t be processed until Monday and you’ll be considered late.
Morning Due Times –Your payment may be due at 9am on the due date, not 5pm.
3. Approved Overlimit Charges
If a purchase puts you over your limit, your credit card company will approve the charge then hit you with an overlimit fee and maybe even raise your interest rate. Keep careful track of your balance and know that even approved charges may put you overlimit.
4. Universal Default
Pay Card A on time but pay late to Card B (or anything else monitored by your credit score) and your interest rate on Card A may jump!
5. “Any Time For Any Reason” Changes
Most contracts include this ominous phrase. It means just what it says – they can increase your interest rate on a whim. Teaser Rates That Don’t Stick – An introductory 0% interest rate can jump to 30% with a late payment or if you go overlimit. Don’t bank on keeping that 0% rate for the entire promotional period.
6. Retroactive Application of Higher Interest Rates
To make things worse, if your interest rate increases, they can apply the higher interest rate to the entire existing balance, not just to new charges.
7. Allocation of Payments
If you end up with two or more different interest rates, they will apply your payments to the balance with the lower interest rate first. The rest of your balance will continue to generate high interest charges until the low-rate balance is entirely paid off.
8. Tricky Interest Calculations
For some cards, you can pay interest on purchases from previous cycles. This is known as double cycle billing. Look for a card that uses the “Average Daily Balance” interest calculation method.
9. Credit “Protection”
Services like this may sound good, but they’re usually useless. The fee for the service likely exceeds the minimum payments it would cover if you became sick or lost your job. Avoid add-on products like this.
10. Binding Mandatory Arbitration (BMA)
This provision requires that you resolve any conflict with an arbitrator selected by the lender, which means you give up your right to take the credit card company to court.
Scan your contract and terms and conditions to see if they apply to you. Don't worry, if you try really really hard, it's possible to understand your credit contract's language...oops, that's trick number 11, not writing contracts in plain English.
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Comments:
This is proof positive that most all people should avoid Credit Cards, and for that matter, debit cards as well.
Every one of these is a scheme to bilk people out of their money, en'mass. why do we do it?
Fiscally responsible people can still get ensnared in this trap and do they really need the credit anyways?
Poor people can't afford the fees and interest and get sucked in to a cycle that leads to bankruptcy and financial loss that spills out in to other parts of their lives..
And what do we get for all of this? The ease of not carrying cash? Is it really worth it?
:sigh: I can't WAIT to get rid of my credit card debt. It's only about $4,000, and it wasn't from reckless spending but some living expenses when my husband had an accident at work that put him out of work for months. But the credit card companies have definitely made it hard to catch up.
I did away with mine in 2005 and haven't looked back. I keep a Debt Card for online orders and the like and use cash for moth other things.. There is no real compelling reason for me to have a credit card.
@thebluepill: Yeah, it seems that cash is the easiest way to force yourself to see what you're actually spending.
Yeah, they slap you with fees until you're bankrupt. However, I am always truly shocked how easy it can be to have fees removed.
Just give them a call, and ask them. It's a little embarrassing, but since the credit industry has no shame itself, why would you worry? Last month, I got out of about $100 in late-fees, just by calling them and reminding them that I usually pay on time, and that I believe the fees were ridiculously large compared to the balance ($35 late-fee on a $25 balance).
My approach is to simply ask them to remove it, arguing something simple that is true. I am a good customer, I usually pay on time, etc. I avoid dramatic stories. And I stay horribly friendly. Make it easy for them.
@Legal_Eagle_In_Training: Cash is def the way to go. I was on the debit card for everything boat for a while but swiping a card doesn't phase me while having to hand over multiple $20 bills is visible pain.
We said good-bye to credit card debt a few years ago after capital one raised our interest rate for no obvious reason. We had one of those "fixed" low rates and when we charged vacation on the card to get the buyer protection that a credit card gives, they more than doubled our fixed rate and didn't tell us why.
Fuck you, Capital One, fuck you and your shitty retarded commericals. Fuck you with a cactus. We paid off the card and closed the account. Now we have one credit card for reserving rental cars and booking hotels but we do not charge anything.
My blood pressure is down, our wallet is fatter, and life is much better.
@thebluepill: Debit cards are bad, though, if you ever get your card/number stolen or need to do a chargeback.
Regarding this tricks, while knowing them may help you rant intelligently at a party, it seems there is little you can do about it.
All credit card companies use the same tricks. It's seems difficult to follow the traditional consumer advice of taking your business elsewhere.
It's not an either/or of these 10 practices - I can say that Bank of America proudly utilizes all of these despicable tricks. Truly Bank of A$$holes!
Wow. I'm not surprised. Banks do the same thing for some of these. The Overdraft "protection" stands out. It lets you overdraw your account and then you get slammed with fees.
The Weekend Due Dates should be illegal though. I guess they expect you to pay before hand, but if you pay on a saturday and it posts on a monday, you should be given a break. geeze
@rwyuan: You can choose not to get cards with double-cycle billing, but yes, otherwise, legislative action is needed...or...don't use a credit card.
What do I get for using a credit card? Well, 1.5% cash back on everything I spend, easy expense tracking, the ability to charge back, and no hassle in carrying cash.
Cumulative interest and fees I've paid (excluding some 5.5% student loans I moved to a credit card at 1.9% interest)? About $60, when I goofed and missed a payment a few years back. I get that much in cash back every month and a half.
The due dates is what i always notice. It's not just credit cards though. i have received gas and electric bills that are due within 14 days. i know when they usually come, 30th or 1st of the month but often are due by the 11th or the 14th. god forbid i go on vacation for the 1st 2 weeks of the month, i'll get 2 late notices on bills.
i believe my credit card due dates have changed but those are usually paid off in full well in advance so i never notice. they do at least give me close to 4 weeks to pay though.
Chase has a wonderful security feature that actively prevents you from logging into your account and paying your bill if you happen to be away from your home computer and telephone. They also love setting your due date to Federal holidays.
for late fees, just tell them that you never got the bill (assuming it's paper, of course); that gets me out every time.
Yes Capital One is easily the worst of them by far, unless anyone can tell me of another credit card company that has pulled the following:
In 2007, Capital One ran a 0% balance transfer scam. They sent out massive pamphlets advertising no cost and 0% APR on balance transfers. However, in the fine print they had a 0% balance transfer statement that only applied to balance transfers after the initial introductory offer APR. In the terms they made up a new transfer called a special transfer APR which had a range of interest from 14%-24% for balance transfers during the introductory APR, usually the first 6 to 12 months of the card. The purpose of these pamphlets was to trick people into believing they would be getting a no cost 0% balance transfer when in fact they would not. You would only find out about this special transfer if you read the fine print or after you received your first bill with 14-24% finance charges on persons transferred balance. Now most people would say read the fine print, and this is part of the scam, when you read the fine print it would list the usually APR terms, with a balance transfer listed as 0% but with a asterisks which explains the special transfer conditions further down in the offer, in my mind this is unbelievable deceptive.
I still do not understand how they have been allowed to get away with this without being sued by someone. I would say anyone banking with Capital One should try to leave as soon as possible as this is and was clearly a deceptive business practice.
@thebluepill: I do not live beyond my means. I make sure I am able to pay all my bills, etc. But I still need credit. Why? well, number 1... Sometimes sh*t happens and I need money right now to cover an unexpected cost. Number 2: I like owning a car and I want to own a house in the near future. I need a credit score for this. So I've taken out credit cards, and I bought a laptop on credit as well.
@thebluepill: I agree with JustThatGuy3 on this one. I get 5% back on gas. Up to 1.5% on grocery. My money is earning interest for me. I get in and out of stores faster. I can issue a charge back. I also get protection like extended warranty or accidental damage.
Sounds like you're getting the companies both ways. If the due date falls on a weekend you're upset because payments don't process over a weekend. If they change the due date to accomodate a weekend, then you're upset for that too.
I've dealt with credit problems in the past and what I do now to avoid issues are that I've set up automatic payment with all my credit cards. I have a minimum pay set up automatically, and I have an additional payment set up through my online bill pay. That way even if something screws up with one of the payment methods the other will cover the payment. Additionally, I set all my payments to pay at least 1 week before the due date.
The 10 items listed above aren't tricks, they're standard amongst all credit cards. Take some time to set up the infrastructure in advance and understand how credit works and you can avoid almost all of these problems.
As noted above, it is possible to use credit responsibly, especially since doing so can be to your benefit, as demonstrated in my own case by countless free flights I've earned!
It is also definitely the case that it is your responsibility to use credit responsibly. I've had my own experiences with debt (which includes getting myself out of it) and I can say with conviction that if you're getting *consistently* shtupped by your credit card company then shame on you. You MUST keep on top of your bills. You MUST pay them on time (you people who play the float know you who are). It's not hard to find out when they are due. And there are plenty of tools and organizations and loads of information where consumers can find information. If you're online then you've got no excuse whatsoever.
here's an example with some very useful links:
[beginnersinvest.about.com]
Did you know you can get free copies of your credit report from each of the 3 credit bureaus? They are legally required to give you one free copy of your credit report each year. Check it.
And for pete's sake don't spend money you don't have. Emergencies are one thing. Nintendos and them brand new $150 shoes aren't.
As someone who came upon fiscal responsibility late in life, I know these things aren't always immediately apparent. But if your money matters to you then you need to make time in your life to learn the basics about using credit responsibly, saving money, spending and budgeting wisely, etc.
[/endrant]
@thebluepill: Doesn't look like my post got posted so here it is again. If they both post...sorry!
As WiglyWorm and JustThatGuy3 stated, there are many reasons to own and use credit card. Cash back, unexpected cost, ease of use, protection (warranty and accidental damage,) credit score, and your own money could/should be earning you interest in the mean while.
@thebluepill: @Legal_Eagle_In_Training: Credit cards all-the-way for me. Cash is too easily spent and unaccountable. Seeing my current tab for the month on-screen clearly shows me where I'm wisely & not-so-wisely spending my money. This is especially true with the smaller purchases that tend to be more likely to be impulsive buys.
Now, using credit cards as CREDIT cards (ie: money you don't currently have) is a bad idea. Drop your pride a few notches and see if friends/family can help you out with some extra $$ until your financial situation improves. MUCH harder to convince friends/family that it'd be a hardship if you didn't get the new HDTV than weekly groceries b/c you've been injured and aren't able to work.
@VA_White: What vitriol directed toward Capital One - and they deserve it! I authorized an online payment 4 days before the due date. Next bill came up online, and they hit me with Late Fee and Over the Limit - because silly me, I should have known they didn't count Saturdays and Sundays as business days, even though the due date was a Sunday! That was it - I cut up every card and now use cash and debit.
Do you ever get burned on that CC? Do the perks outweigh the fees and interest on those items?
if so, then yes, its useful.
I Just really feel its a risk and a time-bomb for a lot of people.
I really dont feel comfortable with a loan who's terms can change rapidly for no reason at all and I have to watch like a hawk.
@dveight: Not to mention that you'll have a hard time renting a car or booking a hotel room with cash.
@WiglyWorm: I understand your argument, but you really don't need credit cards to accomplish the goals you mentioned. Instead of relying on credit cards for emergencies, use a savings account - and receive interest instead of paying it out. And as for buying a home, there are still mortgage lenders who do manual underwriting. This allows the humans involved to actually use their brains!
@rwyuan: actually, i disagree. i have a visa card thru my credit union - get this:
1) went over the limit once by about $12 - no overlimit fee.
2) paid my bill late once - late fee was $15 & b/c i paid within 3 days of the due date, they reversed the fee & i didn't even call them!
3) i've had the card for 13 years - my rate when i first got it? 12% FIXED & it's THE SAME (in fact, it's the only fixed rate card that i have that's still fixed).
4) they don't do double-cycle billing or universal default or any other shenanigans & if i ever have a problem (which is extremely rare, i talk to jayne & she helps me out (& asks how my family is by first name).
so, all you naysayers can chide me for envoking consumerist's own corollary of godwin, but that's the truth. you can still find excellent cards - you just have to look a little harder than rummaging thru the offers sent to your mailbox.
I am more concerned with my bank's trick to debit my account the largest transaction first rather than in the order they were purchased. That ensures them the maximum number of NSF charges.
for moth other things...
I have a hard time keeping up with the trends. Is this some kind of internets fetish kick and does PETA know?
Some of these are unavoidable with some cards, but I've said this before about #7: You can request a payment to be applied to the higher interest rate balance first. You can even do this after the payment has been received and applied to the lower interest rate balance. I've done this plenty of times on a few financing plans and cards, mostly because the request doesn't carry over to the next month, so you have to do it again.
They don't have to respond I'm sure, but you won't know until you try. The default is and always will be to apply it to the lower rate balance first unless the customer makes a request or legislation is passed forbidding it. Don't assume you're helpless about it, make some calls and they may actually listen and work with you.
@stargazerlily: And if you use credit cards responsibly, which means not overspending what you can repay, and paying your balance in full every month, you don't run into any of those problems. I pay for nearly everything (except for my mortgage) with credit cards, pay the balance in full every month, pay no interest while getting cash back/points.
Using a credit card maximizes your interest. If I pay for things out of my savings account, the money disappears today. If I pay for it with a credit card, (a) I get 1.5% cash back, and (b) I get to keep the money for as much as 7 weeks before I pay the credit card company = more interest for me.
Definitely, though, I'm in no way advocating actually BORROWING on a credit card (i.e. paying interest).
Credit cards are a terrific consumer tool. For no annual fee, a credit card company sends me a plastic card. Then they let me purchase things without having the cash on hand. The credit card company allows me to wait a few weeks before having to actually pay for my items. If I pay for the items by the billing due date, I owe NOTHING more than the price of the items I bought. I can't think of a better deal for consumers. Isn't it only fair if I don't pay up by the due date, I will owe interest on the balance?
I have heard of this in the past, is it possible to call up a credit card company and ask to have interest rate reduced? I am trying to pay off my debt with Discover and I'm doing pretty well- paying 3-4x the minimum each month and not adding to it. But the interest rate is pretty high. They solicited me awhile back about some program where if I signed up for automatic payments each month, at the end of X number of months they'd reduce my interest but I declined and now I'm thinking I should have accepted.
@thebluepill: A credit card used well can be a wonderful thing. Used well includes paying the thing off, completely, every month. When I was younger (and had less disposable cash), I had the rule that I would completely stop using my card until I paid the card to zero -- I only hit that rule a couple of times, thank goodness.
With those rules in place, I have a couple of credit cards I use all the time. They all share the following traits:
1. they have a grace period -- they don't charge interest on charges that happen during the month if you pay it off at the end of the month.
2. they pay cash back (not miles, not points, but cold hard cash)
Given this, I charge nearly everything on my credit card: gas, food, travel expenses, whatever. I never do balance transfers, I never do cash advances, and I never use the checks they mail me. Aside from the time value of the money I'm charging, I get a check from the credit card companies at the end of the year for several hundred dollars (yeah, we charge a _lot_). And since we've been good customers for so many years, we've been able to get interest charges removed the couple of times we've been a couple of days late.
At work we all just read a book called Supercrunchers, about how big business makes its vast stores of knowledge go to work to squeeze every penny out of you. Naturally, credit card companies were front and center.
But what it all comes down to is never to forget that a credit card company is a business, and their goal is a profit, and they will do whatever it takes to make one. What should they write on the envelope of a free credit card offer to increase the chance you'll open it? They will test and test and optimize and test some more and continue to do so, because they can. (One of my favorite points from the book, by the way, was "If you call to cancel your card, the amount of time you spend on the phone is directly proportional to how valuable a customer you are . If you go right to a computer that says Ok you're cancelled, that means the credit card company wasn't making anything off of you. but if you get to talk to a human who offers you a better rate, you can be sure that she's got a computer telling her exactly what rate to offer you to maximize the chances that you'll accept.")
If you ever manage to truly "get back at" the credit card companies by figuring out a way to avoid every single fee, eventually they will just generate new fees. Now I'm seeing things like "Go with electronic statements, because we're going to charge for paper ones." It's not that they're horrible people (no, I don't work for one of them :)), it's just that it's the nature of business. They're not offering a free service, after all. The best we can hope to do is not drown in them all.
Personally I have one credit card, and don't carry a balance, except maybe once a year around Christmas when I go overboard and have to catch up for a few months.
Has anyone had success asking a cc company to lower their interest rate? I'm desperately trying to pay off my Discover Card debt. I'm doing pretty well right now, I've been paying 2-3X the min and not adding anything to it whatsoever. But the interest is pretty high. I realize my credit, although i pay on time for everything, is probably not perfect so I don't really have the "I'll take it elsewhere" card to play. About a year ago they contacted me offering a lower interest rate if I signed up for auto bill pay and completed 6 months of it. I declined but I'm thinking maybe I should have taken advantage of it
oops, double-esque post there....sorry
The take-home lesson of the day:
READ (AND UNDERSTAND) YOUR CONTRACTS.
CapitalOne did the early due date thing on me. I fortunately checked my statement online and paid in time, but they are sneaky little bastards. I'd love to get rid of that card, but unfortunately that's my first card and don't want to lose the credit history. :(
@Bagels: My advice is that you head down to your local credit union and see if you can get a fixed-interest loan from them, and use that to pay off the credit card. Then you can cancel and cut up the Discover card and spend a little time getting your financial house in better order so you don't get in over your head again. When you're ready to try credit cards again, start slowly and whenever you pull it out, remember that whatever you're charging MUST be paid for in less than 30 days.
I agree with the "pro" credit card side here--providing that you are only taking advantage of the purchase grace period, and paying them in full each month to avoid the ridiculous interest charges. My main rewards card gives me back hundreds in cash at the end of each year. I can't imagine that they are making much if any money on me as a customer, but they seem perfectly happy to have me though.
I have one other great reason for choosing a credit card over cash. I bought a grill and some accessories the other weekend, for a total of around $600. If my credit card was lost or stolen on that errand, it's a quick call to fix it. If my checkbook were lost or stolen, I could end up facing a huge hassle with bad checks being passed (it happened to an old roommate of mine), and if my money clip were lost or stolen I'd just be plain old out of luck.
@khiltd: They may, but they (as do some others) also have an automated bill payment that you can set up online. You simply set it to pay the monthly minimum, and you're never late. I always pay a second payment to pay down the principle. Not to say all the above things shouldn't be outlawed, I'm just offering tips to avoid losing some money here and there.
Hate to bring in politics on this but this issue is another reason to vote for Obama.
Or for those who do not want to got his website.
# Establish a Credit Card Bill of Rights to Protect Consumers: Obama will create a Credit Card Bill of Rights to protect consumers. The Obama plan will:
* Ban Unilateral Changes
* Apply Interest Rate Increases Only to Future Debt
* Prohibit Interest on Fees
* Prohibit "Universal Defaults"
* Require Prompt and Fair Crediting of Cardholder Payments
Due dates/times, you crafty russians you.