This post was written by Kevin Fleming, a fellow member of the Yakezie, who runs CreditShout, a blog dedicated to helping people save money with credit cards and manage their finances.
Everyone knows that credit cards come with a certain amount of fees. That’s to be expected; it’s part of the way the credit process works, and there’s not a lot consumers can do except comparison-shop for the best deals.
Or is there? In recent years, credit card companies have gotten a bit trickier about slipping fees into credit card contracts, and charging consumers for activities that previously never carried a fee. In fact, not every credit card company is sticking to the rules laid down by the government for fair treatment of customers. What this means, basically, is that you may be getting ripped off.
As a cautious customer, you might want to consider paying some close attention to these “fee traps” as yet another way you can stay in control of your credit card finances. What you don’t know can, after all, hurt you.
The list below gives you some examples of things to look for when dealing with credit card companies. Remember that they’re not all out to treat you unfairly, but they do want to make a profit, and it’ll come out of your pocket.
1. Rates that creep up when you’re not looking
While legally the credit card company is supposed to inform you of a rate change – and in fact, they’re supposed to do so with 45 days’ notice – it doesn’t always go that way. With all of the junk mail these days it can be easy to lose the notice in a shuffle of paperwork. Even worse, the company may make the change and it’ll have a perfectly legal justification.
For example, if you miss a payment, your interest rate can go up, and there’s nothing you can do about it except try to keep up with your balance. In February of 2010 the passage of the Credit Card Act limited the situations in which card companies can raise your rate, but there are still plenty of scenarios in which it can happen.
Note: Always pay your balance off in full each month! If you are using a cash back credit card to earn rewards – NEVER carry a balance. If you do, any rewards you earn will most likely be canceled out by the interest you are required to pay.
2. Fees for things that didn’t have fees before (and higher fees for things that did).
You’d be surprised what types of activities credit card companies can charge you for doing. Maybe it makes sense to have a surcharge on a cash withdrawal, or some other use of your card that falls outside of the normal services. But did you know that some cards now charge an inactivity fee?
This means that you get charged for not using your card, which sounds unbelievable but is absolutely true. That’s just one example, too, of the things that can carry fees. Watch out for changes to the norm and make sure to read your contract carefully.
3. Pay attention to “checks and balances” in the card descriptions.
Comparing credit cards isn’t as simple as it might seem. Far too many people glance over the basic details of the card, like the APR and rewards system, and plunk down for whichever one sounds best on paper.
The problem is that there are a lot more to these cards than what you see at first glance, and upon further comparison the card that looks great up front might be pretty awful for you and your finances. For example, the low APR may sound wonderful… but what if it is hidden in the fine print that the low APR expires after 6 months and then it jumps up to a punishingly high rate?
This is what is meant by “checks and balances” – the card will offer you something great and advertise based on that, but behind the scenes there are plenty of negatives to balance out that positive. Don’t make a hasty decision about a card. It could have a bigger impact than you think. Always read the fine print.