| Are credit card companies trying to scam you? | | | | business must be offset." |
| On the one hand, they provide a valuable service | | | | Industry critics say that an ever growing share of |
| that gives you the added convenience of being | | | | the industry's revenues come from deceptive |
| able to purchase items and services you need and | | | | tactics. One example is how the "default" terms |
| sometimes don't need and to pay them off in a | | | | are spelled out in the fine print of the cardholder |
| manner that best suits you. | | | | agreements. The terms and conditions can be |
| On the other hand, some credit card issuers are | | | | changed at any time, for any reason with only a |
| trying to scam you and they do everything in | | | | 15 day notice. |
| their power - legal or otherwise to do it. Legal or | | | | Here are just some of things that can trigger late |
| not, many of the practices they follow are clearly | | | | fees, penalties or rate hikes. |
| unethical and unless you are a contract lawyer | | | | Late Payments |
| you couldn't determine how they planned on | | | | If you don't pay your bill on time, the company |
| scamming you anyway because they hide | | | | seems quite justified in taking away your good |
| everything in the countless pages of fine print | | | | rate. After all, you've broken the rules of your |
| that comes with every cardholder agreement. | | | | contract. The problem lies in the fact that penalty |
| According to Harvard Law Professor Elizabeth | | | | fees and rates are sometimes triggered by a |
| Warren, the credit card companies are misleading | | | | single lapse or a payment that arrives just a few |
| consumers and making up their own rules. "These | | | | days, even a few hours late or a charge that |
| guys have figured out the best way to compete | | | | exceeds the credit line by a few dollars or a loan |
| is to put a smiley face in your commercials, a low | | | | from another creditor which renders the |
| introductory rate, and hire a team of MBAs to lay | | | | cardholder "overextended" as defined by the |
| traps in the fine print." | | | | three all-powerful credit bureaus - Experian, |
| The problem is that the industry is operating | | | | Equifax and TransUnion. |
| without fear of penalty. There's no regulator or | | | | In addition, the industry is raising interest rates, |
| customer who can bring this industry to task. | | | | adding new fees and generating payment due |
| Deadbeat or Revolver | | | | dates on holidays and Sundays with their only |
| In the credit card industry there are two types of | | | | motive being of tripping you up and hoping it will |
| customers - the deadbeat and the revolver. Don't | | | | result in you making a payment late. The industry |
| take this the wrong way but hopefully you're a | | | | has become a very anti-consumer marketplace. |
| deadbeat because in the lingo of the industry a | | | | Spending on Other Cards |
| deadbeat is someone who uses their credit cards | | | | If you think that one card issuer doesn't know |
| the way they are suppose to. | | | | with whom and how much you spend on other |
| As in they pay-off their balances each month and | | | | cards then think again. As a result, if you exceed |
| therefore incur no interest charges. No profit in | | | | your credit limit or make a late payment on |
| that scenario and thus, if you pay-off your | | | | another card it can trigger what's called a |
| balances each month (about one-third of | | | | "universal default clause" and result in higher rates |
| Americans do) then you should be proud to be | | | | on other cards - cards that you may have had |
| called a deadbeat because you are using your | | | | for years and never had a late payment. |
| credit cards wisely. | | | | Defaulting on Non Credit Card Bills |
| On the other hand, the majority of Americans | | | | Defaulting on any bill (utilities, cell phone, mortgage, |
| are called "revolvers". A revolver is someone who | | | | etc) can trigger higher interest rates on your |
| carries over a balance and is considered to be | | | | credit cards. Every bill you have is tracked by the |
| "the sweet spot" of the banking industry. This | | | | 3 primary credit bureaus and with the emergence |
| "sweet spot" continues to expand as the average | | | | of technology your information is readily available |
| credit card debt among American households has | | | | to any card issuer. So if you default or pay late |
| grown to about $8,000 -- which is more than | | | | on anything, they'll spot it and it could result in |
| double what it was just ten years ago. This debt | | | | higher rates on some or all of your credit cards. |
| has helped generate record profits for the credit | | | | Some experts say the profitability of credit cards |
| card industry in 2004, an estimated $30 billion | | | | began twenty-five years ago when the banking |
| before taxes. | | | | industry successfully eliminated a critical restriction: |
| The 0% Interest Offer | | | | the limit on the interest rate a lender can charge |
| The game today is the "0% interest for 6 | | | | a borrower. Deregulation, coupled with a revolution |
| months" offer. Once again, this can be a legitimate | | | | in technology that enables the almost real-time |
| and great deal if you know how to play the game | | | | tracking of personal financial information and the |
| ("deadbeat") but if you don't ("revolver") it will end | | | | emergence of nationwide banking, has facilitated |
| up costing you more money in the long run | | | | the widening availability of credit cards across the |
| because after the initial 6 months the rate will | | | | economic spectrum. But for some, the cost of |
| usually jump up to a much higher rate than the | | | | credit is often far greater than it appears. |
| normal purchase rate. | | | | If your rate is suddenly increased, the first thing |
| Rate Hike Triggers | | | | you should do is cancel the card and move the |
| The industry provides many reasons to justify | | | | balance somewhere else. If you can't do that for |
| rate hikes and in all fairness, some are actually | | | | whatever reason, then contact your local |
| valid. However, many are not and are just flat-out | | | | consumer protection agency and if all else fails |
| deceptive. One Banking Association spokesman | | | | you may need to contact a lawyer. |
| said that, "Because the credit card business is | | | | This article may be reproduced only in its entirety. |
| unsecured lending, the risks associated with the | | | | |