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Credit Card Entrapment:
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The next time you open up your CC statement, take a real close look to all the "junk" inside particularly the very hard to read insert Call "changes to you credit card agreement". That's right the one you always throw away or say that I'll read it later and never really do.
Since you neglected to read all that fine print you just threw away you should realize what you just did. In essence you just agreed to all the changes the credit card company made IF (and that's a big "IF") you use your credit card again. Most people do and don't even read all "that stuff" in the envelope with their statement. Since these were automatic changes effective immediately or on a specific date that they set in the new terms and conditions.
Some of the ones the credit card companies use most often include, but not limited to, changing your APR (annual percentage rates) you thought that 0% would last forever? Changes to your existing fees and/or adding new fees. Let us not forget that they also like to change your grace period, the time that you can pay it off and not receive a finance charge.
If you don't know or you don't keep track of your credit limit...stop using it! If not you will get yourself into this next little fix. When ever you do go over the limit (they make sure and give you a little slack so they have an extra fee to charge) they hit you with an "over the limit fee" making you more over the limit and making you pay down your balance even more or you will face yet another over the limit fee the following month. There is nothing like a little $35 or more fees to cheer you up when you have to pay your bills.
If you really like higher rates on your credit card then just make sure the payment is late, that is a sure fire way of getting an increase in you APR. Some credit card companies go as far as saying your payment is late if not received by noon or 1 p.m. on the payment due date. Thanks for another $29 or more fees are the likely response from the credit card company.
If you are a procrastinator and wait until the last minute to put money in the bank for your check to the credit card company to clear then you need to be very careful. With all these new high tech devices we have these days they are a lot more efficient at processing their money taking days shorter than they did even 5-10 years ago.
For the ultimate procrastinator who will wait until the last minute and pay online. Once again the credit card companies will most likely make you pay for that convince. I have seen anywhere from $1 to $15 just to make your payment online.
This one is my favorite one and it took me awhile to figure this one out, because like you I really just didn't pay attention. And man did they make me pay for it too. Some credit card companies offer cash advances. You really have to think to yourself "How good of a deal is it really going to be?" after all they already charge 15%-18% or higher!
Why is it such a bad deal?
I'm glad you asked.
In most cases when you use your credit card to withdraw cash more fee kick in:
- A cash advance fee is normally an up front fee any where from 2%-4% of the cash you take out
- The cash advance on the credit card ALWAYS has a higher interest rate than your normal purchases
- The interest starts as soon as you get the money out of the ATM
- Many of the credit card companies also require that you pay off all the balance from your purchase before you can pay off your cash advance.
Here's a little example on how they get you with those extra fees:
Let's say you regularly charge $200 dollars a month with purchases on your credit card and you keep a running balance on your credit card of $1000. If you went out and needed cash right away and took out a $100 cash advance you would have to pay off the $1000 dollars before you would be able to get to paying off the cash advance. Now let’s not forget the $200 you put on every month that you would have to pay off before they would pay off the cash advance. I was going around in circles on this one for years before I figured it out.
Free advice don't use a cash advance unless you absolutely have to.
Taking the time to read the little "junk" the credit card companies send you in the mail and knowing where all these fees go will save you a lot of money in the long run.
**Update**
Are You Being Gouged? Senate Holds Hearings On Credit Card Industry
Are CC companies trapping consumers in debt and engaging in unfair practices to maximize profits? Yesterday, the US Senate Committee on Banking, Housing, and Urban Affairs held hearings on the credit card industry, and the answer to that question depends on which group was testifying.
Robert D. Manning, author of CC Nation and a previous guest on EverydayWealth Radio, pointed out that it used to be that the best loan client was one who could afford to repay a debt. In today's CC industry, however, the best customer is someone who "can never repay the debt," or consumers who can only afford the minimum payment.
US Public Interest Research Group's Ed Mierzwinski described several of the numerous traps in CC agreements, including mandatory arbitration clauses that prevent consumers from suing in court.
Linda Sherry of Consumer Action testified that when her organization researches its annual CC report, representatives pose as consumers trying to get information about credit card terms and pricing - but mostly get sales pitches and few details from card company representatives.
CC representatives from major card issuers Capital One, Citi Cards and Chase also testified, and insisted they don't engage in unfair consumer practices.
Then let your Senators know what you think of the current state of the credit card industry by contacting them at www.Senate.gov
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