Financial Literacy - Credit savvy
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Credit cards not all the same

When it comes to penalties and fees, not all credit cards discipline their customers for payment missteps or punish them to the same degree for random acts of the market.

The policies of some issuers tend to be more consumer-friendly than others. For instance, some offer more lenient terms and conditions and are less likely to pull the ol' switcheroo with the payment date that could easily trip up customers.

Good credit cards aren't necessarily easy to find, especially these days. And they may not be offered by the big guys in the industry. For a little help in separating the wheat from the chaff, consumers can start their search at Web sites such as Cardratings.com, which tracks credit card offers. And don't forget to compare credit card rates at Bankrate.com.

As always, the best way to avoid traps is to pay your balance in full every month. Short of that, borrowers need to roll up their sleeves and dive into the terms and conditions of each credit card offer to find out if that card is a deal or a dud.

What to watch out for
  1. Rates that go up for no reason.
  2. Universal default.
  3. Annual fees.
  4. Fees, fees and more fees.
  5. Grace period.
  6. Default rate.

Rates that go up for no reason

"The biggest complaints we're getting right now are the cards that raise your interest rates for no reason," says Gerri Detweiller, a credit adviser for Credit.com. "They really don't give a reason. Typically, if you talk to them, they will say it is the state of the credit market. They just have to."

And for now, that is perfectly legal. Many issuers include a clause in the fine print reserving the right to raise interest rates based on market conditions.

"I think if I'm in the market (for a card) and there is any chance at all that I'm going to carry a balance -- or even not -- I'm going to find out what is the exact policy of this issuer about jacking my rate up. Most issuers have this kind of a catch-all that says that if general market conditions are bad, they can raise your rates," says Curtis Arnold, founder of Cardratings.com and author of "How You Can Profit From Credit Cards."

"I can tell you this: You can't find anyone that would say that general market conditions are favorable right now," he says.

According to a 2008 survey by Consumer Action, not all issuers change terms based on market conditions. But 17 out of 22 issuers surveyed (77 percent) say they can change terms at any time for any reason.

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How to avoid: Shop at local credit unions and smaller banks. Small credit issuers tend to have more consumer-friendly policies, says Detweiler.

Arnold agrees that not all issuers have that catch-all phrase in place.

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Balance Transfer Cards 15.66%  0.01 15.67%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.87% --0.00 10.87%
 
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