Credit Traps Snag Consumers

Nearly 20 years ago I worked for a small consumer advocacy organization in Washington, DC. Each week we received sacks full of mail from consumers across the country requesting our list of credit cards with low interest rates and no annual fees. If you wanted a low interest rate on a credit card back then, you often had to apply to a bank in Arkansas where interest rates were capped by state law.

Those were the good old days.

Now, interest rates range from zero percent to a high 39 percent. It's tougher to find (and keep) a good credit card than ever before. That's because there are many new traps that can snag unsuspecting consumers.

At the top of the list is the "universal default clause" which allows issuers to monitor you credit report and raise your rate if you are late on any bill that appears on your credit report. One major issuer, for example, will hike a 0 percent rate to 24.99 percent if you slip up!

In fact, true "fixed rates" are rare. Many consumers don't realize that a "fixed" credit card rate isn't the same as, say, a fixed-rate mortgage. In most states, card issuers can raise the interest rate on a fixed-rate credit card with just fifteen days' written notice. The new rate can typically apply to existing balances as well as new purchases.

Fees are also on the rise. Take late fees, for example, twenty years ago a late fee on a credit card was still fairly unusual, and typically wasn't charged unless you were 15 days late with a payment. Now you often must get your payment to the issuer by a certain hour in the morning or you'll be charged a late fee of as much as $39. Go over the limit and you'll not only pay more interest, but a steep over limit fee as well.

Foreign travelers are often charged a "currency conversion charge" of 1 - 2 percent of the amount of their purchase. As the result of a class action lawsuit, Visa and MasterCard were ordered to provide refunds of those fees in certain circumstances. The problem wasn't that the fees were illegal, but it was determined they weren't properly disclosed. The case is being appealed.

Here are some findings from the nonprofit Consumer Action's annual survey of credit cards (www.consumer-action.org):

-- The vast majority of surveyed cards have significantly higher penalty rates that are triggered by one or two late payments in a period of six months to a year.

-- One-fifth of surveyed issuers have shifted to tiered late payments, which Consumer Action interprets as a deceptive way of charging higher-than-average late fees.

-- The number of cards with $35 late fees has more than doubled from last year.

-- More than half the cards surveyed require cardholders to pay only 2 percent of the monthly balance each month - a disturbing trend that dramatically increases the overall interest paid by cardholders.

-- More than one-third of surveyed institutions will not provide a firm annual percentage rate (APR) until they have screened the applicant's credit history. Instead, they give only a meaningless range of rates before screening, which makes comparison shopping difficult if not impossible.

Don't get me wrong - I am not saying that credit card companies should not make money. In fact, easy access to credit has helped fuel our economy, especially when the going gets rough. But many consumers now are literally trapped by high-cost debt with few options. I've spoken to consumers who feel they have no choice but to file for bankruptcy because their credit card companies all raised their interest rates to between twenty and thirty percent, and they simply cannot manage to pay the balances down. With all the landmines out there for credit card users today, the best strategy is still to pay down debt as quickly as possible and limit yourself to a couple of cards to avoid problems.

Sometimes, of course, that's easier said than done!

For more information on ways to build great personal and business credit, visit www.BusinessCreditSuccess.com.

About The Author

Gerri Detweiler is considered one of the country's top credit experts. She has been interviewed for thousands of radio, television and print newstories including USA Today, The Wall Street Journal, The New York Times, Dateline NBC and many others. She has testified before Congress several times and worked on reform of the national credit reporting laws.

---

Ten Steps To Building A Good Credit History

Are you thinking of buying a house? Do you want... Read More

Save Money and Lower your Payments by Improving or Repairing Your Credit

Having a better credit score not only represents easier access... Read More

Your Credit Card May Be Costing More Than You Think!

Do you know what your credit card is truly costing... Read More

Student Credit Cards

STUDENT CREDIT CARDS With graduate debt averaging... Read More

Choosing the Best Low Interest Credit Card

With so many low interest credit cards on offer, how... Read More

Dont Dig Your Own Pit

If you want to enjoy your life out of spending,... Read More

A Summary of the Fair Credit Reporting Act

This summary of the Fair Credit Reporting Act will explain... Read More

Bad Credit Credit Cards

Chances are you've gotten your share of offers like this... Read More

Tips for Choosing a Credit Card Company

Credit Cards are essential for any consumer today. However, when... Read More

Finding the Right Credit Card

There are so many credit cards out there to choose... Read More

7 Ways To Squash Identity Theft

It is the scourge of our age: identity theft. Thieves... Read More

Credit Cards

Credit cards are a form of unsecured credit. The issuer... Read More

19,178 Identity Theft Victims Per Day - Are You One Of Them?

Identity theft statistics are shocking. And we are told that... Read More

Grants, Loans, Free Credit Cards And Credit Repair: The Whole Truth And Nothing But The Truth

You got creditors calling you everyday. You could lose the... Read More

Useful Tips on Borrowing Money

Here are some useful tips on borrowing money. Borrowing money... Read More

First Major Regulatory and Legislative Victory of 2005 for Creditors and Consumers

Under the Fair Debt Collection Practices Act, collectors are not... Read More

Credit Counseling Basics

Credit counseling is an option you might want to consider... Read More

The Exact Action To Take When You Find Errors In Your Credit Report

There are times when you may be turned down for... Read More

Convenience Can Be Costly

You've just opened your credit card bill and attached to... Read More

When You Are Eligible For A Free Credit Report

By Federal law, you are entitled to one free credit... Read More

A Cure for an Ailing Credit

Credit has become a much-used word, thanks to the various... Read More

How did a Thief get my Name? Don?t be a Victim of Identity Theft

How do these people get my name? If you have... Read More

Fixing A Credit Report

Fixing a credit report starts with seeing what's on it.... Read More

Credit Cards: How To Use Them

Credit cards can be a very quick way of getting... Read More

Credit Card Debt: How To Control It

A lot of people spend more money than they can... Read More

Credit and Banking Money Saving Services

The first rule when applying for banking and credit services... Read More

Credit Enhancements: Seven Tips For Enhancing Business Credit Transactions

What are the avenues available to businesses with weak credit... Read More

What Can Happen to You as a Victim of Identity Theft, Facts & Figure

Is identity theft really that serious? Thousands of people every... Read More

Are 0% Credit Cards Reaching Their End?

Are Credit Card companies starting to feel the pinch? We... Read More

Different Ways to Borrow Money

There are many different ways to borrow money. Outlined below... Read More

Credit Counseling: Could it Work for Me?

In the face of financial hardship, many seeking a responsible... Read More

Finding and Applying for the Right Credit Card Offer Online

Anywhere you go online nowadays, you will see a multitude... Read More

Legislators Ponder New Credit Protection Laws

Legislators in Washington, D.C. are considering several credit-related consumer protections... Read More