How do you find out if your credit card is doing this? What does it look like in their 'information' or fine print?

I thought this practice was now shunned by the card companies because it was one of the main calls for overhauling credit practices by politicians.

There was an interesting financial discussion on NPR over the weekend. The author blamed financial games like this for draining money out of the manufacturing sector.

It does make sense. If your spending more and more of your wages paying off fees and interest you have less to spend on tangible goods. When people buy less there is less demand and then fewer manufacturing sector jobs.

@NewsMuncher: Easy. Pay off your balance. In full. A balance transfer will do it. If you still get a bill the following month, you know you've been boned.

@bohemian: Same argument was made about $4 gas last summer. I have a subcompact car, so it didn't affect me as much as it would somebody who drives an SUV, but it still cost me $25 - $30 a week to drive my little bitty hatchback. Sending all that money to Exxon-Mobil and the guys with the white robes who hate our guts that might otherwise have gotten spread around at some tourist trap, at Lowes, or at the mall definitely has an impact on the economy.

I continue to drive (and love) my itty bitty hatchback for the same reason I am glad as hell I keep a zero balance on my plastic - because I am sick of paying people who f*** me over.

Isn't it the practice of charging finance charges on the average balance of the previous two months?

It's a scumbag practice nonetheless. If your balance is consistent, you're not paying much extra through this practice. If you payoff your balance in full, however, you will be charged extra because even though you had a zero balance, you're being charged a finance charge based on the average of the zero balance month and the month you carried a balance.

The credit card companies are evil. HSBC and ETrade are the worst in my opinion.

Your first clue would be:

You have a Discover card.

"Why this is good: By increasing credit card company profits you help the economy grow."

Oh, please. Their profits are fine. What about my checking/savings account? Does that not matter any longer?

@bohemian: Well, to be fair, most of the fees and interest are 100% optional.

The real reason our manufacturing sector has gone downhill so much is our "unregulated free trade" policies. Why should companies manufacture anything here when they can outsource it some Third World nation and avoid pesky things like worker treatment and environmental laws? And then just reimport the products right back into America unfettered?

@nakedscience: someone missed the sarcasm-train.

Anything for the credit card companies. ANYTHING.

Scotiabank in Canada does this as well. I paid off my March bill in full two days late. My April statement had interest on it, which was my fault for paying late. Because I was going to be in the hospital for a few weeks for scheduled treatments, I paid my April bill in full 11 days early. Guess what? More interest charges on the May bill. I get an interest penalty for paying 2 days late, but no break for paying 11 days early. These credit card companies are fucking thieves.

Credit Cards: Payday lenders of the middle class.

nakedscience... I believe that line is called sarcasm...

So what would happen if some large percentage of people with large accumulated balances just stopped paying on their credit cards? And what if this percentage was too large for the companies to process through the court ... err, wait ... the arbitration system (don't these have to go to the court system, anyway, to get enforcement judgments)? Are the junk debt buyers flush with enough cash to buy off these non-performing debts? Does this mean they are just going to collect from us, anyway, in the form of a bailout?

@Sean Masters:

It's been a common occurrence.

@bohemian:

Those credit card company jobs are in America. Those manufacturing jobs aren't - and never will be again!

We do it because the citizens of Taiwan, China, Pakistan, India, etc. will do it for less than Americans will. Don't give me some liberal song and dance about how we're really doing it just because businessmen are evil sadists who want to skirt human rights law. All anyone who runs a manufacturing business cares about is cost, margin, sales. Skill-less labor is like pressure - it flows from high wages to low wages. Malthus grins in his grave.

If you don't like it, well, get a degree and a job at a credit card company. Because pretty soon you aren't going to have any other options. And yeah, you can try to tariff it for a little while, use protectionist trade policies to keep American jobs in American factories or whatever. But five minutes of those higher prices and the paycheck-to-paycheck working class will beg their politicians to undo the damage done. Failing that, a few decades of economic stagnation will send the manufacturing jobs a-flowing back to the NEW third world...

@Skaperen:

Good questions!

1.) The difference between what a junk debt buyer is willing to pay for a credit-backed asset and what the companies have those marked at is wide. That makes it worth it to try to hold onto them for now, eroding the capital base and hoping for the economy to snap back.

Some of that is reasonable, and some of it is predation; keep in mind, profit motive has buyers and sellers playing games with each other. Some of it is because junk debt buyers are not, actually, flush with cash. The whole system behind the debt markets is mispriced because it is liquidity-constrained. Which creates a self-reinforcing asset devaluation cycle until ONE buyer finds ONE seller and we can have a real credit market again.

2.) Lots of people with balances have stopped paying their credit cards. Unemployment rates tend to correlate positively with default rates in every recession; this one's extra-fun because the beta is above-average! That means that defaults are growing faster than usual relative to unemployment. Oddly, though, borrowers are more likely to let their house be foreclosed than to stop paying their credit cards.

@WiglyWorm:

American Express does it. It's happened to me the few times that I've carried part of the balance over to the next month. Amex claims that gives them the right to reach back for two months worth of finance charges. It's not based on when I made the charge or when I paid it. They've just written terms into their fine print saying they can do it. I've always been able to call and get the extra finance charge removed. But, it goes without saying that the charge should not be assessed in the first place. It's a scummy, low-rent way to increase profits without actually earning them.

@ADismalScience: You're ignoring the fact that American manufacturing is often actually more efficient. We actually could probably compete reasonably well with Third World nations if it were a level playing field, but it's not. We have much heavier regulation of things like environmental damage and labor standards here, for good reason. If we allow our businesses to outsource to places that don't, then we lose control over our own sovereignty on those issues AND we immorally export our human rights problems and environmental damage.

And yes, I do believe it's immoral to move your operations somewhere where human rights standards are low, and exploit that to get higher profit margins and/or lower costs. Business SHOULD care about considerations other than the short-term bottom line. If they don't, they should be made to.

I don't support tariffs that are designed purely to protect jobs here. I support free trade when there is a genuine advantage to it. I don't support UNREGULATED free trade where our companies here have to pay to avoid environmental damage but companies overseas don't. They should either meet our environmental standards if they want to import to America or they should be taxed an equivalent amount.

It's called Residual Finance Charges...

If you all read your T&C of using the card, you'll understand how it works. It's relatively simple way and, personally, feel it's justified...

@johnva:

You're ignoring that trade is about comparitive advantage. Of course it isn't a level playing field - we have an educated population, good (if aging) infrastructure, an operating credit system (if ailing). Just because a nation can be self-sufficient doesn't mean it should be - most Americans' productivity is better spent on non-manufacturing activities. All we're looking to capture in my eyes are the dollars-and-cents benefits of net gains from trade.

The problem with your counter - which is legitimate in some respects - is the nebulous valuation of those noneconomic factors of a highly polical nature, which isn't succinctly expressed. Or even incentivized, by most consumers and governments! After all, I as a businessman cannot be held responsible for "human rights issues" that can easily be cast as cultural differences. Or simple disagreements on what "human rights" actually are between policymakers and conglomerates. Especially when most consumers just don't give a shit anyway! If they did, wouldn't they be hitting my bottom line?

@Dismal: I agree that artificial import barriers are, in the large sense, counter-productive. They're both a subsidy to less efficient local mfr's and hinder comparative advantages. So blind trade tariffs make no sense.
But.
We DO have import tariffs, only for stupid things like commodities. Hundreds of billions of dollars worth. An argument can be made that if we used tariffs to support higher-skilled yet non-college degree required jobs, we'd do better than protecting, say, sugar cane producers or Big Agra.
There's also the concept of Fair Trade vs Free Trade. There's no way for an advanced economy to compete in the mfr'g space if Developing economies not only use low-wage advantages, but drive them further down thru worker exploitation, no environmental regulation and currency manipulation.

So, IF we're going to have trade barriers (practically, we must expect some), then we should apply them to beneficial spheres and have a ratcheting set of tariffs that reward importers that commit to Fair Trade.

I think we agree on the big picture, but I'm interested in seeing what you think about implementation in these regards.

Quite frankly, it's part of the T&C of the card. The problem is that the T&C tend to be in such specialized language that the average person can't understand them.

Seriously. Try reading, say, your life insurance policy fully some time. It's amazing how much you won't understand (presuming, of course, you don't work in the finance or insurance industry).

@ADismalScience: My boss was listening to talk radio in California on his last trip and heard a very interesting call-in show. People were calling in with their debts (house, car and cc etc.) and the host would tell them which were easiest to default on and how long it would affect them.

It's no longer taboo to walk away from a mortgage in the hardest-hit markets and pretty soon no debt will be worth holding on to (apparently auto loans were safest since they advised trading in for a cheaper car).

Where do you think this will take us Dismal?

@Trai_Dep:

As for tariffs, I'm not in favor of any of them ever. The only tariff I would support is a proportional measure in response to another nation's abuses.

The problem with Fair Trade and the hundreds of similar programs is that they don't clearly define the carrots-and-sticks system for all participants in the marketplace. If a significant financial advantage exists in exploitation and there are complicit governments/corporations out there, that advantage will be exploited until consumers collectively act to prefer fair trade products. I'm sorry, but I'm simply not convinced that they will; since the consumer doesn't hold businesses writ large accountable, all participating in Fair Trade does is place you at a competitive disadvantage.

I would love to see consumerist advocate more of that and less "oh no, call centers suck!" Of course they stuck. You're stupid, the call center employees are stupid, and stupid people talking always ends in violence.

The overarching problem is that global companies are like mini-governments, but don't act like them. They have no real vested interest in the more disposable forms of human capital, and act accordingly. Until corporations have internationally-accepted responsibilities nothing will be accomplished. Good freaking luck with that, by the way.

@ADismalScience: I fully understand your position, and I even agree somewhat. Free trade is good for everyone when there IS a genuine comparative advantage to producing things in one country vs. another, I agree. Sometimes there are natural reasons for that, such as a certain resource being in undersupply in one country and oversupply in another, for example. That's win-win, and shouldn't be squashed by tariffs.

What I don't agree with is treating human beings as if they are another resource to be exploited. I don't agree with treating the environment as if it's just a dumping ground for unwanted industrial byproducts. And I feel that if either of those things is allowed to be the basis for a purely financial comparative advantage, then we will see a "race to the bottom" where our own country loses its control over these issues in our own country. We might see pressure to ease environmental regulations, for example, to match China or Africa, if it turned out that those are saving Chinese companies money. Or we might see pressure to abolish overtime pay laws so that employers could get by on fewer workers. So while I think we should allow free trade in general we should retain the right to regulate and level the trade playing field on particular issues that WE define as important to US. China or whoever doesn't have to agree with our definition of human rights, but we should retain the right to impose a tariff on goods they are exporting to us if we don't agree with theirs. The only other possible solution I can see is some sort of world government, and that is itself fraught with difficulty.

But the mere fact that these things are hard to quantify is not a reason we should just let them slide.

@KyleOrton:

To a world of tighter credit, higher loan-loss reserves, deflation, the destruction of a lot of paper wealth, and a massive retirement crisis.

@johnva:

Oh, I agree. I raise the hard-to-quantify point to highlight the political/awareness challenges, not the moral viability of any of it. Exploiting humans is wrong. Making people aware of how exploitation happens and what role they can play in stopping it is complicated.

@ADismalScience: Multinational corporations are the main problem, I agree. They need to be brought under control somehow. As I mentioned above in my other reply to you, one option is more extensive world government, with more powers to enact global regulations and control of these multinational corporations. If you don't like that option, the only other practical one I can see is some sort of "smart tariffs" like Trai Dep mentioned. I think those sorts of limited protections are absolutely necessary if we want to retain the current model of autonomous nation states with power over their own values.

I don't really disagree with you completely, but I think I have a different viewpoint from you on the relationship between politics and economics. I believe that the two are irrevocably intertwined, and that mixed economic systems (partially socialized, partially private) are the best model. We can't just view everything as dollars and profit margins, or we will lose control not only over our economic future but our political future, our societal values, and ultimately our own sovereignty as a nation. Economic questions beget political solutions, which beget economic responses. But allowing global free trade to take place without barriers dissolves the POLITICAL barriers between different nations, in my view. That might be okay if you think that's a good thing, but I think that remains to be seen.

@ADismalScience: Yeah, I agree. I'm just not convinced that the free market, even with educated customers, can solve that problem without some sort of more advanced framework for intergovernmental trade negotiations.

@Jim Topoleski: Yeah, it seems to have been abandoned by all the ones I know of that used to do it.

@johnva:

I would prefer more extensive world government, personally, but there are achievability concerns there. As for "smart tariffs," isn't that just passing the cost of compromise to the consumer in the end? I prefer the third rail - consumer education that promotes conscientious choices and incents more equitable treatment of indigent laborers.

I agree that politics and economics are intimate, and that mixed economic systems are often the most fair/achievable structures. I'm simply representing a viewpoint in my commentary. But I will say tend to prefer solutions that only fetter global trade to prevent harm or wrongdoing; too often, tariffs are used to protect constituents and/or contributors. I simply prefer more judicious use of the tariff than you do in all likelihoid, which is really not that bad of a middle ground to find with somebody on the internet.

@ADismalScience: It is frustrating to know what to consume these days, if you wish to be conscious of abuse. For example: There are no real, hard definitions for many things that a conscious consumer would care about and there are a million ways to mislead people. With the green movement, there is a new trend called "greenwashing" and it goes like this: [greenbydesign.com]

The average consumer does not have the time or knowledge to be able to discern the consciousness of every product from ketchup to chicken to toilet paper.

Even 'fair trade' stores like Trader Joe's or Whole Foods, which operate on this basis, are not perfect. I buy cereal in packages that tout their greenness... and they look like plastic, but I cannot find any recycling triangle on them anywhere. Are they cornstarch? Do I compost them? And did they make sure to give the people who harvested their 'fresh blueberries' adequate water while they were harvesting the crop? No clue.

I get what you mean about not really being able to adjust tariffs to such things as human rights. Things like that tend to become corrupt very quickly with all the money at stake.

@ADismalScience: I agree. Good discussion.

This reminds me of when my credit card company tried to charge me interest because when I paid it online I typed in a 23 instead of a 32. Being new to credit cards at the time, I thought I would only pay interest on the ~$9 I didn't pay, but I grudgingly paid interest on the entire bill. The next month I got charged interest again. I called up and they said it was because I didn't pay my entire bill the previous month. I said 'well I wouldn't of used it if I knew I would be charged interest again' she said "well that is policy' and told me it would happen again for the next 2 months as well. I than asked to be transferred to the cancellation department, and she somehow managed to figure out how to reverse not only the current charges, but the charges for the previous month and the pending charges on whatever I bought in the next two months.

Sometimes I think the actual companies are more of a scam than scammers themselves.

I assume this is the thing where they keep charging the "periodic finance charge" for a month or two even after I've paid off full balances for those months? Because the couple of times I've missed a payment (most recently because of paying too early and it being recorded as part of the previous statement period, grrrrr), they keep charging me interest for a month or two after the fact and that pisses me off.

Wow Hurts, crappy advice. I keep small balances on my credit cars and make large pay'ts every month. I am actually a benefit to my credit card company and so far my balance hasn't been lowered, it's been raised and my apr has stayed the same through this recession. I don't need them canceling my card while I'm overseas on vacation.

@NewsMuncher: You would need to just give them a quick call and ask how the interest is accrued on your account.

I had this same problem with the BestBuy card from HSBC Nevada.

They were quite helpful. They answered my billing dispute letter with a nonsense form letter that was non-responsive, they ignored my certified letter to their registered agent in my State, and then they ignored the summons.

They did however send a check right away when I called their office in Las Vegas to ask what county they were in as I was going to contact the sheriff to enforce a judgement by seizing office equiptment. They asked that I fax the judgement, and they called back in 20 minutes.

Oh, it is Clark County Sheriff Civil Process division or the Bobby G the constable (who only charges $30 for a till tap!)

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No matter what, Fraud is Fraud. These practices are dishonest and illegal, but nobody bothers prosecuting issues like these. Sure, making big headlines for prosecuting some kid that made some sort of mistake is good for their career advancement, but taking on companies that deliberately Fraud the public, because they operate in the private sector somehow gives them immunity. Oh, and it might cost the tax payer money to prosecute someone that has a larger bank account than say your average American citizen. So really 'Personal Responsibility' only applies to the person who gets constantly and consistently scammed by American companies, but it does not apply to the companies themselves. Now you have power and utility companies doing the same exact criminal behavior, except they are protected by the Public Utilities Commissions and the States in which they reside. (Especially the 'Right to Corruption' States.) Somehow you would think Americans would get mad about all this Fraud and manipulation, but instead from the comments posted here and in the news media in general, it looks as though they just get dumb and dumber by the minute. Banks can bet off the books with your money, then they can charge you for the money they lost betting and now if you don't pay their extortion rates, you get black marks on your credit. Insanity has taken over America.