Broke-Ass Student

Avoid falling victim to these legal credit card ruses and traps.

As credit card companies consistently churn out ‘preapproved’ letters offering enticing rates, it’s easy for unsuspecting consumers to fall prey to unscrupulous, yet perfectly legal, credit card tactics. This is why it’s imperative to always bust out the magnifying glass and pick apart the fine print before settling on a seemingly brilliant offer.

Here are a few sneaky tactics to be on a diligent lookout for;

• Always use the credit card mailing address provided on the enclosed envelope which arrives with your most recent statement for payment. Credit card companies sometimes enjoy switching around their payment PO Boxes without informing the consumer. A well-intentioned payment can flop around ‘lost’ in the mailing system for weeks if unknowingly sent to the wrong address. This is a blatant attempt to purposely nab you on late payment fees. It also provides the credit card company an excellent opportunity to raise your interest rate as a result. When in doubt, always call the credit card company’s payment department to verify the correct payment mailing address. Being in the habit of submitting credit card payments as early as possible can help eliminate confusion and last-minute scrambling.

• Make sure the credit card that arrives in the mail is, in fact, the credit card you originally applied for. Carefully check the terms of agreement and fine print before activating your shiny new credit card. You may *think* you’ve been approved for that fabulous offer. But if you didn’t qualify, the credit card company may have sent a completely different card with incomparable (and completely different) terms. Ahh, the good ol’ bait and switch trick. Don’t fall for it. Always keep a record of what you applied for and compare the terms with the newly arrived card. If they’re different, call the credit card company to cancel the account immediately.

• Rates that drift up, up and away. Keep a keen eye on your statement every month and don’t be too surprised if the rate has suddenly ballooned upward. And to think, the credit card company doesn’t even need a reason. If it’s in the fine print of the terms and agreement, the rates can be raised on a whim. If you should uncover a ridiculous rate fluctuation, call the credit card company to request a lower rate. After all, they have no incentive to adjust your rate if you don’t ask. Always remember that competition between credit card companies is relatively fierce. And chances are, if you’re a good customer, they’ll want to retain you. But lenders won’t just offer to lower a rate - you’ll need to ask.

• Ballooning “fixed” rates. Don’t ease into a false sense of security with fixed credit card rates either. A “fixed” rate merely means the credit card company has 15 days to notify if they decide to jack up the rates. You know those shiny little pieces of white paper that arrive with statements, the ones you sometimes toss in the garbage without a glance? Consider the tiny print on the bottom as your legal notification. Thoroughly reading everything that arrives with monthly statements can help you avoid being caught off guard.

• Be aware of the Universal Default Clause. As if credit card companies didn’t have enough ammunition to slam unsuspecting consumers with exorbitant rates … This nasty little gem of a clause basically entitles a credit card company to justify hiking up current rates based on other accounts in your credit report. Slipping behind on a car payment? Don’t be surprised if suddenly your credit card account suffers along with it.

 Nik Agarwal recently shared his thoughts on the Universal Default Clause over at his blog, The Air.

• Shrinking Grace Periods. This is the biggest no-no to watch out for. A grace period is the time between the date of purchase and when the account balance amount begins accumulating interest. If you’re diligently submitting credit card payments on time and not carrying a balance from one month to the next, you can usually slip outside the scary-tactics-and-ridiculous-fees radar to avoid being slammed. However, more and more credit card companies are wisening up and offering crappy credit cards with lesser, or even NO grace periods. Please check the original terms and fine print to make sure you are being offered a grace period of at least 25 days. With grace periods of 20 days or less, your account may all ready be accumulating hefty interest rates before the bill has even arrived in the mail.  

• Costly credit card fees = crap line of credit. There are plenty of credit cards which entail no “side” fees, such as annual fees, one-time setup fees, activation fees, etc. Always shop around, and be extremely wary of those that do. (Nip over to one of my recent posts, A Plethora of Credit Card Offers.) If you’re being offered a credit line of $400, yet paying over $350 in fees, that’s one crappy line of credit! And the credit cards which offer the most abusive fees are also usually the ones which have the highest rates (25% and above) with little or NO grace periods. Yikes. Run from these ridiculous pre-approved offers as quickly as possible. Please don’t be suckered into these disgraceful scams. 

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1. Build awareness by always reading the fine print, as well as any notices sent along with your monthly statements.
2. Only use credit cards to charge items which can be paid in full each month before the grace period expires.
3. Avoid outrageous default interest rates by sending credit card payments early each month. I’ve established the habit of immediately paying all my bills online the day the bill arrives.
4. It’s up to the consumer to request a better interest rate from the lender. If you’ve been a good customer with on-time payments for six months to a year, the lender will most likely grant a lower rate rather than risk losing your business. Don’t feel afraid to be vocal.
5. If you’re still unhappy with your credit company’s current negotiated terms and rates, shop around for a better deal and take your business elsewhere.

~†~ Baby Steps are Key ~†~

Use credit cards to your advantage through awareness and responsible utilization.

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How to Use Credit Cards Without Getting Ripped Off by the banks credit cards are a great tool if you can just follow some simple guidelines