10 hidden dangers of credit cards
Credit cards. It may seem very difficult to
get by without them in this day and age, but the fact of the matter
is it's becoming more and more expensive to live with them.
That's because credit card companies have managed
to stack the deck in their favor, thanks to obliging lawmakers and
regulators who have allowed them to gouge consumers for exorbitant
fees and unconscionable interest rates.
And you don't have to look hard to find out
how tricky they can be.
"Just read the fine print of your credit
card agreement," says Ed Mierzwinski, Consumer Program Director
of the U.S. Public Interest Research Group in Washington, D.C. "It's
a license to steal."
"The industry is out of control, it's getting
away with robbery," says Robert Heady, author of the best-selling
Complete Idiot's Guide to Managing Your Money."
Robert D. Manning, a professor
of finance at the Rochester Institute of Technology, agrees. "The
system is weighted against the consumer," he says.
But knowledge is power, and if
you want to avoid getting squeezed, you should be aware of the top
10 money-grabbing tricks credit card companies have up their sleeves:
1. The universal default penalties.
Card issuers regularly check their customers' credit reports for
late payments on any of their bills. Any late payment can be used
as an excuse to trigger a hike in your credit card's interest rate,
even if you have never made a late payment to the card issuer.
A recent study by Consumer Action,
a San Francisco-based consumer advocacy group, found that 39 percent
of credit cards had universal default penalties in 2003. This year
the figure jumped to 44 percent.
2. Bait-and-switch card offers.
Direct mail offers generally advertise
the issuer's premium card at an eye-popping low interest rate, while
the fine print says the company can issue a more costly non-premium
card with a higher annual percentage rate if you fail to qualify
for the premium card. Just because you apply for a card with a low
rate doesn't mean the card that shows up in the mail actually carries
that low rate.
3. Shrinking grace periods.
Historically, grace periods -- the time
during which your transactions don't accrue interest -- were 30
days long. They now average 23 days, and some issuers have whittled
the grace period to 20 days. Some cards have no grace period at
(continued on next page)