The old bait and switch
So you've got this ingenious plan. You're going to apply for a great credit
card that gives you tons of frequent-flier miles, put all your shopping
on it, and then head to the Bahamas in February. Stop -- the miles you
earn, if any, might get you no farther than Hope, Ark.
When and if you get that card, study the terms carefully. If you don't qualify
for the great card, the credit card company can send you a completely different
card with different terms. If it's not what you want, don't activate the card.
Call the company and cancel the account.
Want to play hide-and-seek with your credit card company? No? Too bad.
Tag, you're it. Here's your late fee.
Credit card companies sometimes change their payment P.O. Box. If you send
your payment to the wrong one, it may meander around the postal system or your
credit card's headquarters for a while before finding its way to the payments
department. That means you're responsible for the late fee and your interest
rate could be raised. It will be raised if you have one of those super-duper
low rates -- guaranteed.
To avoid falling for this trick use the envelope provided in your statement.
If you use a different envelope or use online banking, check the mailing address
on your statement each month or call the company to verify the address. Always
pay early to avoid last-minute mix-ups.
Late fees in minutes
If you're five minutes late it could cost you $29. You see, even though your
due date may be the 15th of the month, upon further inspection of your statement,
you might see it's actually due by 1 p.m. So if Harvey the letter carrier
took a few minutes of shut-eye at the cul-de-sac, it will cost you a late
fee and a possible rate increase. Check your statement to see what time and
date your payment is due and send it in early. Read more.
This fee is a no-brainer -- don't go over. But what you don't know are
the little tricks credit card companies use to push you over the limit.
One Bankrate reader wrote us to describe how his brand new credit card pushed
him over the limit.
He applied for a card with a high-credit limit and requested a balance transfer
to pay off another card. He received his new credit card and was hit with an
over-the-limit-fee the first time he used it. Apparently, the credit card company
gave him a card with a much lower limit and transferred as much of his balance
as the card could hold. So when he got his card, unbeknownst to him, it was
already maxed out. Read more.
Cash advance fees and rates
Don't take cash out of your credit card. Read the fine print on your statement
and you'll see it's a very bad idea. Your card might have a really low rate
for purchases, but if you take out a cash advance, get ready for a shock.
The rate for cash advances is much higher. And there is no grace period --
you start paying interest right away.
Aside from paying a high rate on the cash you take out, you're going to pay
a fee, usually 2 percent to 4 percent of the amount advanced. And your payments
will be applied to the lower-interest balance before they are applied to your
cash advance. Read more.
Reverse the late payment, but up the rate
Credit card companies may forgive a late payment, but they could still punish
you by raising your rate. Let's say you fell for the ever-changing-mailing-address
trick. You call and scream until they reverse the late-payment fee. But next
month, when your bill arrives, you notice you're now being charged a much
higher interest rate because you were late on a payment. A Bankrate reader
told us this happened to him. Read more.
Increasing the rate based on other accounts
Your credit card company may use your late auto loan payment to justify a rate
increase. They frequently check your credit report and look for any late
payments to justify raising your rate. Read more.
Fixed rates aren't fixed
A fixed rate means the credit card company has to give you 15 days notice before
raising your rate. You can call and ask them to lower it, but they don't
have to do it. Here's how to ask for a lower rate.
Raising your rate for no reason
They don't need a reason. They can just do it -- it's in the agreement. If
they won't give you a lower rate, get a new card and cancel the old one. Search
for a better card here.
"Free gifts" that
cost a bundle
Did you really think they'd give you something for nothing? Throw away those
offers that come in your credit card statement. Read more.
Selling credit card theft insurance
You don't need theft insurance for your credit card. If it's stolen, you are
only liable for $50, at most. Read more.
Selling disability coverage
Credit card disability insurance will make debt worse, if it ever kicks in.
One Bankrate reader wrote in to say she developed cancer and her credit card
company kept finding reasons not to activate her disability insurance even
though she paid for it every month.
But credit card disability insurance is a really bad idea anyway. Even though
you don't have to make payments, the debt piles up all along. And you can't
use the card during that time either. Read more.
Setting low minimum payments
It'll take forever to pay off your balance if you only pay the minimum. Most
credit card companies set the minimum payment at 2 percent of the debt. At
that rate, you could be paying for life. To see how long it will take you
to pay off your credit card, use our True cost of paying the minimum calculator.
Cards that cost more in fees than they give in credit
If you've got shaky credit, you could fall prey to a really bad credit card
deal, like the card with $360 in fees that leaves you with a $19 credit limit.
Balance-transfer fees and disappearing low rates
If you're not careful, you'll get socked with unexpected fees and soaring rates
when you transfer your balance. Before transferring a balance, ask if there
is a fee. Also, ask how long the low rate lasts. Those low rates on credit
card offers are usually only good for six months. If you are late on one
payment, the low rate is immediately replaced with a much higher rate. Another
note of caution: When you transfer a balance from one card to another, wait
to see the balance appear on the new card before closing the old one.
Don't be fooled. Use this step-by-step guide to balance transfers.
Zero-percent offers -- with a big catch
Those zero-percent offers sound like a good idea until you miss a payment or
the introductory period ends. After that, you can end up with a sky-high rate.
Charges for charging abroad
In addition to the 1 percent currency exchange fee on Visa and Mastercard,
some major banks are charging a 2 percent fee on credit card and debit card
purchases made outside the United States. After a vacation's worth of spending,
those fees will add up. Read more.
Shrinking grace periods
The grace period is the time between when you make a charge on your credit
card and when that amount starts building interest. Many credit card companies
are shrinking that time down to 20 days, meaning that by the time you get
your bill, you may already be paying interest. Read more.
Pre-paid gift credit cards worth less than you pay
The fees on these cards can make them worth less than they cost. And they can
expire rapidly -- making them worthless. You'd be better off giving cash.
Is anyone there?
If you want to talk to customer service, you better have a lot of time to kill.
Credit card companies don't want to save you money at their expense. So they
will transfer you and put you on hold until you are blue in the face. The
name of the game is Frustrate the Customer Until They Give Up and Go Away.
This trick isn't limited to the credit card industry, either. When I wanted
to lower my bill, a certain cell phone company spent an hour and a half putting
me on hold, transferring and "accidentally" hanging up on me. Persistence
pays off -- but it's exhausting.