20 sneaky credit card
Credit card companies can be as slippery as a handful
of greased Jell-O. They have all kinds of tricks to gouge your wallet and drive
up your bill. While arguably unfair, all these tricks are legal, leaving you no
alternative but to stay as informed as possible to protect yourself.
statement, report any irregularities immediately and watch for these 20 sneaky
credit card company tricks. Start saving on fees now.
The old bait and switch
So you've got this ingenious
plan. You're going to apply for a great credit card that gives you tons of frequent-flier
miles, put all your shopping on it, and then head to the Bahamas in February.
Stop -- the miles you earn, if any, might get you no farther than Hope, Ark.
and if you get that card, study the terms carefully. If you don't qualify for
the great card, the credit card company can send you a completely different card
with different terms. If it's not what you want, don't activate the card. Call
the company and cancel the account.
2. Musical address
Want to play hide-and-seek with your credit card company? No? Too bad. Tag,
you're it. Here's your late fee.
Credit card companies sometimes change
their payment P.O. Box. If you send your payment to the wrong one, it may meander
around the postal system or your credit card's headquarters for a while before
finding its way to the payments department. That means you're responsible for
the late fee and your interest rate could be raised. It will be raised if you
have one of those super-duper low rates -- guaranteed.
To avoid falling
for this trick use the envelope provided in your statement. If you use a different
envelope or use online banking, check the mailing address on your statement each
month or call the company to verify the address. Always pay early to avoid last-minute
3. Late fees in minutes
If you're five minutes late it could cost you $35. You see,
even though your due date may be the 15th of the month, upon further
inspection of your statement, you might see it's actually due by
1 p.m. So if Harvey the letter carrier took a few minutes of shut-eye
at the cul-de-sac, it will cost you a late fee and a possible rate
increase. Check your statement to see what time and date your payment
is due and send it in early. Read
4. Over-the-limit fees
This fee is a no-brainer -- don't go over. But what you don't know are the
little tricks credit card companies use to push you over the limit.
Bankrate reader wrote us to describe how his brand new credit card pushed him
over the limit.
He applied for a card with a high-credit limit and requested
a balance transfer to pay off another card. He received his new credit card and
was hit with an over-the-limit-fee the first time he used it. Apparently, the
credit card company gave him a card with a much lower limit and transferred as
much of his balance as the card could hold. So when he got his card, unbeknownst
to him, it was already maxed out. Read
5. Cash advance fees and rates
Don't take cash out of your credit card. Read the fine print on your statement
and you'll see it's a very bad idea. Your card might have a really low rate for
purchases, but if you take out a cash advance, get ready for a shock. The rate
for cash advances is much higher. And there is no grace period -- you start paying
interest right away.
Aside from paying a high rate on the cash you take
out, you're going to pay a fee, usually 2 percent to 4 percent of the amount advanced.
And your payments will be applied to the lower-interest balance before they are
applied to your cash advance. Read
6. Reverse the late payment, but up the
Credit card companies may forgive a late payment, but
they could still punish you by raising your rate. Let's say you fell for the ever-changing-mailing-address
trick. You call and scream until they reverse the late-payment fee. But next month,
when your bill arrives, you notice you're now being charged a much higher interest
rate because you were late on a payment. A Bankrate reader told us this happened
to him. Read
7. Increasing the rate based on other
Your credit card company may use your late auto loan
payment to justify a rate increase. They frequently check your credit report and
look for any late payments to justify raising your rate. Read
8. Fixed rates aren't fixed
A fixed rate means the credit card company has to give you
15 days' notice before raising your rate. You can call and ask them
to lower it, but they don't have to do it. Here's how
to ask for a lower rate.
9. Raising your rate
for no reason
They don't need a reason. They can just do it
-- it's in the agreement. If they won't give you a lower rate, get a new card
and cancel the old one. Search
for a better card here.
10. "Free gifts"
that cost a bundle
Did you really think they'd give you something
for nothing? Throw away those offers that come in your credit card statement.
11. Selling credit card theft insurance
You don't need theft insurance for your credit card. If it's stolen, you
are only liable for $50, at most. Read
12. Selling disability coverage
Credit card disability insurance will make debt worse, if it ever kicks in.
One Bankrate reader wrote in to say she developed cancer and her credit card company
kept finding reasons not to activate her disability insurance even though she
paid for it every month.
But credit card disability insurance is a really
bad idea anyway. Even though you don't have to make payments, the debt piles up
all along. And you can't use the card during that time either. Read
13. Setting low minimum payments
It'll take forever to pay off your balance if you only pay the minimum. Most
credit card companies set the minimum payment at 2 percent of the debt. At that
rate, you could be paying for life. To see how long it will take you to pay off
your credit card, use our True
cost of paying the minimum calculator.
that cost more in fees than they give in credit
If you've got
shaky credit, you could fall prey to a really bad credit card deal, like the card
with $360 in fees that leaves you with a $19 credit limit. Read
15. Balance-transfer fees and disappearing
If you're not careful, you'll get socked with unexpected
fees and soaring rates when you transfer your balance. Before transferring a balance,
ask if there is a fee. Also, ask how long the low rate lasts. Those low rates
on credit card offers are usually only good for six months. If you are late on
one payment, the low rate is immediately replaced with a much higher rate. Another
note of caution: When you transfer a balance from one card to another, wait to
see the balance appear on the new card before closing the old one.
be fooled. Use this step-by-step
guide to balance transfers.
offers -- with a big catch
Those zero-percent offers sound
like a good idea until you miss a payment or the introductory period ends. After
can end up with a sky-high rate.
for charging abroad
In addition to the 1 percent currency
exchange fee on Visa and Mastercard, some major banks are charging a 2 percent
fee on credit card and debit card purchases made outside the United States. After
a vacation's worth of spending, those fees will add up. Read
18. Shrinking grace periods
The grace period is the time between the statement date and
the payment-due date. Many credit card companies are shrinking that
time down to 20 days, meaning that by the time you get your bill,
you may already be paying interest if you carry a balance. Read
19. Pre-paid gift credit cards worth
less than you pay
The fees on these cards can make them worth
less than they cost. And they can expire rapidly -- making them worthless. You'd
be better off giving cash. Read
20. Is anyone there?
If you want to talk to customer service, you better have a lot of time to kill.
Credit card companies don't want to save you money at their expense. So they will
transfer you and put you on hold until you are blue in the face. The name of the
game is Frustrate the Customer Until They Give Up and Go Away.
trick isn't limited to the credit card industry, either. When I wanted to lower
my bill, a certain cell phone company spent an hour and a half putting me on hold,
transferring and "accidentally" hanging up on me. Persistence pays off
-- but it's exhausting.