Fix My Finances

Not the most recent article, as it was published end of July, but likely something that is worth reading into. Not falling into more problems due to such tricks is always a good thing, and here, Smartmoney.com warns about Alarming Credit-Card Tricks:

Companies have begun increasing borrowers’ interest rates to 30% or more simply because they’ve applied for a mortgage or car loan, or because the company has decided the borrower has too much available credit. Consumer advocates warn of other trends like socking people with overseas fees even when their purchases are made with U.S. dollars, and penalizing them for not using their credit cards.

A quick overview of five of the sneakier tricks lists the following ones (more details are given in the article itself):

• Bumping up your APR when applying for a mortgage. Creditors often increase your interest rate when they notice negative activity — say, a late payment or an over-the-limit fee — on any of the accounts that show up on your credit report.
• Two-cycle billing. Two-cycle billing is a sneaky and complicated practice. It affects people who usually pay off their balance in full each month, but end up in a situation where they have to carry a balance for one or more months. A cardholder in this situation will end up paying more in interest than with a credit card that doesn’t have a two-cycle billing.
• Prepare to Pay More. In 2003, banking regulators issued a directive requiring banks to change their minimum-payment formulas over the next few years. The goal? To make people’s minimum payments higher to enable them to pay off their balance faster.
• Overseas Rip-Offs. Foreign-currency-exchange fees are also on the rise. Not long ago, many credit-card issuers — particularly big banks — charged fees equaling only 1% of overseas purchases, effectively passing on the 1% that Visa and MasterCard charge the bank for those transactions. Recently, however, most of the big banks have started tacking on an additional 2%.
• Not using the card brings punishment. Some banks are trying to make money from those customers as well. How? They increase their interest rates, so that when consumers make charges, they pay more in interest.

Isabelle Gissinger wrote this on August 14th, 2005 and filed it under Credit Card Debt, Debt, Fix My Finances |