- Jul 16, 2001
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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.
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.