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(continued
from previous page) Top 10 hidden
dangers of credit cards
By Peter
Davidson • Bankrate.com 4. Two-cycle billing. While
most card issuers use the standard one-month method to calculate interest charges,
some use a method that calculates interest on two previous months' balances. Companies
compute interest charges on your average daily balance by adding each day's balance
and then dividing that total by the number of days in the billing cycle. Some
do it on a monthly basis but others use the average daily balance over the last
two billing periods. If you carry a balance this usually means that you've lost
any grace period on your new purchases. Unless you pay off your balance for two
months in a row, the two-cycle method will include the prior cycle's average balance
in calculating your finance costs even though you paid off that cycle's balance
in full. You don't face that expense with a single-cycle card. 5.
Inactivity charges. Credit card companies don't make money if you don't
use your cards. Keeping your card in your wallet could incur a hefty fee, as much
as $15 if you haven't swiped your card in six months, but charges may be incurred
for shorter intervals.
6.
Late payment fees. A recent study by Vertis, a marketing
company that researches consumer credit usage and payment habits, found that 2
percent of all credit card holders occasionally miss getting their credit card
payment in on time. They pay dearly. The national average is $29. MBNA (one of
the largest issuers of credit cards), Bank of America and Providian are among
the steepest chargers. Their late-paying customers get squeezed $39, according
to Consumer Action. And there's yet
another downside to paying late: A higher interest rate. In a 2003 survey, Consumer
Action found that just one or two late payments will trigger a higher interest
rate. 7. Over-limit fees.
Exceed your credit limit by even one cent and you'll be hit with over-limit fees
of $25 to $39. And don't forget -- charges such as a $39 late fee can then trigger
a $39 over-limit fee. 8. Balance
transfer fees. It's the big tease: A rock-bottom introductory
rate to transfer your balance, but that tantalizing low rate may come with a steep
transaction fee, 3 to 5 percent, for transferring your balance to their card,
which means transferring $1,000 at 4 percent will cost you $40. "It's really
very tricky," says California attorney Howard Strong, author of "Credit
Card Secrets." He adds, "They have all these sneaky fees. You need
to be extremely cautious." By
the way, last year, the industry took in $43 billion in fee income, up from $39
billion in 2002, according to R.K. Hammer Investment Bankers. The industry's take
is expected to increase again this year. 9.
Mandatory arbitration. "If there's a dispute, you
may have given up your right to your day in a court of law," says attorney/author
Strong. "If that's the case, your only recourse is mandatory arbitration."
10. Payment allocation. If
you're carrying a balance, and you use your credit card for purchases and cash
advances, or you're paying off a promotional rate and then add charges beyond
the promotional period, your card company will first allocate your payments to
the charges that will earn it the most money. In most cases, that means it will
apply your payment to the balance that has the lower rate, thereby allowing the
balance with the higher rate to accumulate and compound interest. | 
