Credit card companies' top 10 money-grabbers

IGBT

Lifer
Jul 16, 2001
17,962
140
106
Text



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.

The industry is out of control; it's getting away with robbery," says Robert Heady, author of the best-selling book "The Complete Idiot's Guide to Managing Your Money..


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% of credit cards had universal default penalties in 2003. In 2004, the figure jumped to 44%.


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.



 

RossMAN

Grand Nagus
Feb 24, 2000
78,855
355
136
1) Always read the fine print before signing an agreement.
2) Never make a late payment, even if you don't receive your monthly statement in the mail.
3) Never go over your limit, check online banking almost daily to monitor your account.
4) ... common sense FTW!
 
Aug 23, 2000
15,509
1
81
Which is why you don't use credit cards. The only 2 things you should ever buy on credit is a vehicle and a house. If you can't afford that 72" Plasma HDTV then don't charge it.

I don't use credit cards, and I never will. I learned my lesson the hard way when I was a teen.
 

Linflas

Lifer
Jan 30, 2001
15,395
78
91
As long as they stay within the disclosure they provide before you take advantage of their service then I don't care what they do. No one holds a gun to your head and forces you to use a credit card.
 

spidey07

No Lifer
Aug 4, 2000
65,469
5
76
Originally posted by: RossMAN
1) Always read the fine print before signing an agreement.
2) Never make a late payment, even if you don't receive your monthly statement in the mail.
3) Never go over your limit, check online banking almost daily to monitor your account.
4) ... common sense FTW!

ayep.

"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.
"

That's the BIG one right there. Most people don't know about this and a high percentage of agreements contain this clause. If you are late to anything to anybody they can consider you in default.

Moral of the story - always, always, always read your agreement first.
 

D1gger

Diamond Member
Oct 3, 2004
5,411
2
76
There is no reason not to use a credit card. I love the free money for 30 days and the reward programs. Just don't ever miss a payment or carry a balance and credit cards are great.
 

spidey07

No Lifer
Aug 4, 2000
65,469
5
76
Originally posted by: JeffreyLebowski
Which is why you don't use credit cards. The only 2 things you should ever buy on credit is a vehicle and a house. If you can't afford that 72" Plasma HDTV then don't charge it.

I don't use credit cards, and I never will. I learned my lesson the hard way when I was a teen.

actually I'd use a 0% offer for 2 years to get a 72" plasma.

free money FTW!
 

MajorMullet

Senior member
Jul 29, 2004
816
4
81
I use my credit card for everything because of the rewards program that it has. But I never miss a payment and I pay it off in full every month.

Basically, I'm the kind of guy that the CC companies despise :p
 

kranky

Elite Member
Oct 9, 1999
21,019
156
106
Originally posted by: spidey07
Originally posted by: RossMAN
1) Always read the fine print before signing an agreement.
2) Never make a late payment, even if you don't receive your monthly statement in the mail.
3) Never go over your limit, check online banking almost daily to monitor your account.
4) ... common sense FTW!

ayep.

"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.
"

That's the BIG one right there. Most people don't know about this and a high percentage of agreements contain this clause. If you are late to anything to anybody they can consider you in default.

Moral of the story - always, always, always read your agreement first.

Had a friend JUST get nailed on this - interest rate went from 7.9% to 29.9%! And it wasn't because of a late payment, it was because the amount of credit line used was deemed to be too high. They sent a notice two months ago informing him that he could cancel the card and pay off the existing balance under the old rate, but he only glanced at it, figured it was some marketing crap, and threw it away. When he saw the new rate on the statement, he called to ask if he could stick with the old rate, and they said "Too late!"
 

GTaudiophile

Lifer
Oct 24, 2000
29,767
33
81
Once again, liberals try to shift the blame away from those who deserve it!

Spend less than you make, use some self-discipline, delay instant gratification, and cut up your credit cards if necessary. Staying out of credit card debt is as simple as that!
 

spidey07

No Lifer
Aug 4, 2000
65,469
5
76
Kranky,

oooh...that's pretty dang low. But I'm sure they could do it as I'm sure there was something in your buddy's agreement that said they could.

Other moral here - go over your limit and you are in default. default rate used for everything.

What gets people trapped is when they build up a high credit card debt and then just "move it to 0% offer" thinking all is well and good. Then something happens. Their 0% on 10K is now 30%.

That's how the problems start. 3 thousand dollars or more a year on interest and they are never able to pay it down.

A friend of mine just declared bankruptcy (he had to) because of this exact scenario.
 

dullard

Elite Member
May 21, 2001
25,648
4,162
126
You miss the sneakiest method that I suspect many people fall victim to. It is the combination of balance transfer fees and payment allocation.
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%, for transferring your balance to their card, which means transferring $1,000 at 4% will cost you $40.

Payment allocation. If you're carrying a balance and 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.
That 0% interest offer sounded great. But then you have to consider a ~4% fee. Not too bad. But wait. As you pay off the bill, you are really paying off that 0% part, while that sneaky hidden fee may be earning interest at ~20%.

Too many people think they are clever by constantly transferring balances from one 0% card to another. One day, this practice will bite them when that sneaky combination above kicks in.

This is all common sense though. Pay it off, on time, and in full each and every month. Then you can sit back and reap in the rewards. Those who avoid credit cards are missing out on tons of free stuff and are hurting themselves severely with a worsened credit score.
 

Engineer

Elite Member
Oct 9, 1999
39,230
701
126
"Personal responsibility" is the key. "You" sign up for the card and use it. If there were not users of such cards, then the OP wouldn't be happening.

While I may not like the end result, it's the users of these cards and the way that most use them that "usually" gets them into trouble to begin with.

<--- Hates debt!!!
 

RossMAN

Grand Nagus
Feb 24, 2000
78,855
355
136
Originally posted by: kranky
Originally posted by: spidey07
Originally posted by: RossMAN
1) Always read the fine print before signing an agreement.
2) Never make a late payment, even if you don't receive your monthly statement in the mail.
3) Never go over your limit, check online banking almost daily to monitor your account.
4) ... common sense FTW!

ayep.

"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.
"

That's the BIG one right there. Most people don't know about this and a high percentage of agreements contain this clause. If you are late to anything to anybody they can consider you in default.

Moral of the story - always, always, always read your agreement first.

Had a friend JUST get nailed on this - interest rate went from 7.9% to 29.9%! And it wasn't because of a late payment, it was because the amount of credit line used was deemed to be too high. They sent a notice two months ago informing him that he could cancel the card and pay off the existing balance under the old rate, but he only glanced at it, figured it was some marketing crap, and threw it away. When he saw the new rate on the statement, he called to ask if he could stick with the old rate, and they said "Too late!"

WTF? That's absurd, is that even legal?
 

Zugzwang152

Lifer
Oct 30, 2001
12,134
1
0
Originally posted by: RossMAN
Originally posted by: kranky
Originally posted by: spidey07
Originally posted by: RossMAN
1) Always read the fine print before signing an agreement.
2) Never make a late payment, even if you don't receive your monthly statement in the mail.
3) Never go over your limit, check online banking almost daily to monitor your account.
4) ... common sense FTW!

ayep.

"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.
"

That's the BIG one right there. Most people don't know about this and a high percentage of agreements contain this clause. If you are late to anything to anybody they can consider you in default.

Moral of the story - always, always, always read your agreement first.

Had a friend JUST get nailed on this - interest rate went from 7.9% to 29.9%! And it wasn't because of a late payment, it was because the amount of credit line used was deemed to be too high. They sent a notice two months ago informing him that he could cancel the card and pay off the existing balance under the old rate, but he only glanced at it, figured it was some marketing crap, and threw it away. When he saw the new rate on the statement, he called to ask if he could stick with the old rate, and they said "Too late!"

WTF? That's absurd, is that even legal?

I guess it's possible if he was mailed a change of terms and agreements, and took no action to cancel the card. IIRC, they can do practically anything as long as they tell you in advance and give you the option to cancel your account.
 

Viper GTS

Lifer
Oct 13, 1999
38,107
433
136
I got ratejacked by Chase last month for being close to my limit. Not over mind you, just close. And there was no universal default violation. Went straight to 29.99%, & I never saw any notice (many people say the same thing, I do read my mail but I never saw it).

Chase can kiss my ass though, all my accounts with them will be closed before the end of the month & balances paid off.

FU Chase.

:|

Viper GTS
 

Night Blade

Senior member
Oct 9, 1999
439
0
0
Originally posted by: JeffreyLebowski
Which is why you don't use credit cards. The only 2 things you should ever buy on credit is a vehicle and a house. If you can't afford that 72" Plasma HDTV then don't charge it.

I don't use credit cards, and I never will. I learned my lesson the hard way when I was a teen.

Dito, haven't had a card since I was 19, don't miss them at all.
 

SaturnX

Diamond Member
Jul 16, 2000
3,415
0
76
Recently, I did all my xmas shopping on credit, (and paid it in full), and I came close to my limit, and figuring it would stay the same, the next time I checked my online account, they had increased my limit, hah.

--Mark
 

Zugzwang152

Lifer
Oct 30, 2001
12,134
1
0
Originally posted by: Viper GTS
I got ratejacked by Chase last month for being close to my limit. Not over mind you, just close. And there was no universal default violation. Went straight to 29.99%, & I never saw any notice (many people say the same thing, I do read my mail but I never saw it).

Chase can kiss my ass though, all my accounts with them will be closed before the end of the month & balances paid off.

FU Chase.

:|

Viper GTS

Wow that sucks. As soon as I pay off my Chase card, I'll be canceling it as well.
 

Dunbar

Platinum Member
Feb 19, 2001
2,041
0
0
Originally posted by: RossMAN
WTF? That's absurd, is that even legal?

Yes, they are providing a revolving line of credit based on your credit score/risk. If your credit score goes down, risk goes up, and universal default allows them to increase your interest rate. You have to remember, credit card debt is unsecured so they have no property to forclose on if you stop paying. I'm not saying I agree with these practices, but it is certainly legal and should not be regulated. If people don't like these policies they should take their business elsewhere. Any attempt by liberals to regulate these issues will only result in the less fortunate having less access to credit. I believe a person should be able to decide if a CC is, or is not, a good deal for them, not the government!

This article reads just like PBS's Frontline epiosode on the credit card industry. I just watched it last weekend (in HD!), you can download it on their website.