Way back when we were 19 years old and getting our first credit card, Capital One sent us a pre-approved card with a $500 limit. Yippie! We soon found out that no matter how early we sent our payment in, we always got a late fee. Every. Single. Month. After writing letters and causing a fuss, we cancelled the card. Imagine our suprise when, so many years later, reader Tim sends us a Business Week article explaining how and why Capital One uses various tactics to increase fees. In this case, it’s over limit fees, but the whole deal sounds very similiar to the problems we had with Capital One back in ’99.

“Cap One… is simply aiming to maximize fee income from debtors who may be less sophisticated and who may not have many options because of their credit history. By offering several cards with low limits, instead of one with a larger limit, the odds are increased that cardholders will exceed their limits, garnering over-limit fees. Juggling several cards also increases the chance consumers may be late on a payment, incurring an additional fee. And if cardholders fall behind, they pile up over-limit and late fees on several cards instead of just one. “How many more ways can I fool you?” says Elizabeth Warren, a Harvard Law School professor who has written extensively on the card industry. “That is all this is about.””

Take a look at the article, pay your balance off in full every month and think twice about using Capital One.— MEGHANN MARCO

Capital One’s Credit Trap [Business Week]

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