20 sneaky credit card tricks

[cashlenders]

20 sneaky credit card tricks
By Amy C. Fleitas • Bankrate.com

Credit card companies can be as slippery as a handful of greased Jell-O. They have all kinds of tricks to gouge your wallet and drive up your bill. While arguably unfair, all these tricks are legal, leaving you no alternative but to stay as informed as possible to protect yourself.

Read your statement, report any irregularities immediately and watch for these 20 sneaky credit card company tricks. Start saving on fees now.



1. 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.



2. Musical address 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.

3. Late fees in minutes If you're five minutes late it could cost you $35. 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.


4. Over-the-limit fees 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.



5. 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.

6. 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.


7. 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.


8. 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.


9. 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.


10. "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.


11. 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.


12. 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.


13. 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.


14. 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. Read more.


15. 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.


16. 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.


17. 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.


18. Shrinking grace periods The grace period is the time between the statement date and the payment-due date. 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 if you carry a balance. Read more.


19. 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. Read more.


20. 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.

[cashlenders]

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.


Being late is going to cost you, big time.

With credit card late fees climbing to $39, this is no time to be the least bit tardy with your card payment.

These payment tips and strategies from Bankrate.com will show you how to steer clear of those monster late fees.

Mind those payment rules. One of the most important things you can do is follow your card issuer's payment guidelines precisely. These guidelines are outlined on the back of each credit card bill.


When it comes to processing credit card payments, all these little details are incredibly important.

Payment guidelines may include everything from a specific payment address to the time of day by which the payment must be received to be credited that day. Many issuers also stipulate that payments must arrive in the preprinted envelope sent to the customer.

While the Fair Credit Billing Act requires issuers to credit payments the day they are received, each issuer is allowed to set specific payment guidelines. If any of the guidelines are not met, the issuer can take as many as five days to credit the payment.

An on-time payment could easily become "late" during that five-day period, so follow those payment guidelines carefully.


To ensure your payment gets credited immediately:

Use the preprinted envelope provided by the credit card company.

Include the billing coupon, and be sure to write the amount being paid in the box provided.

Make sure checks are legible and the payment amount is correct. Sign the check. Write the credit card account number on the check.

Send payment with proper postage to the payment address requested by the issuer. It's a good idea to mail your payment at least one week in advance of the due date. Ten days to two weeks prior to a due date is even better.

Pay minimum immediately
The safest strategy for anyone sending a card payment by snail mail is to pay the bill as soon as it arrives, even if you can only make the minimum payment. Giving your issuer the 2 percent minimum payment it wants ASAP is a great way to guard against late fees. And you can always send a bigger payment when you've got more cash.

Move your due date
Are your credit card bills due at a time of the month when you're running low on cash? Many card issuers will let you set your own due date -- if you ask. Why not time it so your credit card bill arrives right after a paycheck? That way you'll have plenty of cash to pay your bill each month.

Automatic online, on-time payments
Paying bills online can be a great buffer against late fees. Most major issuers, including Citibank, MBNA, Discover and American Express accept online payments. You can sign up for these services on issuer Web sites. Choose an online payment amount that automatically covers the minimum amount due on a credit card each month. Next, choose an automatic payment date well in advance of your credit card due date. This is a great way to pay credit card bills while traveling. To keep your interest costs down, you'll want to make additional card payments online or by snail mail as soon as you can.

Pay by phone
Paying by phone is a quick and easy way to make a last-minute card payment. Just grab your checkbook and call the toll-free number on the back of your credit card. You'll be asked for a check number and the bank routing number, which is printed at the bottom of every check. After you're done with the call, rip up the check because you won't be able to use it again. Many credit card companies accept payments by phone. Some issuers charge fees, ranging from $5 to $15 for this service. Be sure to ask.

More express options
If the due date is looming, consider sending a credit card payment by express mail or wiring the payment with Western Union. The U.S. Postal Service charges $13.65 for an express mail flat rate envelope, which guarantees next-day delivery by noon to most destinations. Wiring your payment will cost you as well. Western Union's fees for money-wiring service vary depending upon the amount of payment. These express services, while costly, are still cheaper than most credit card late fees. Make sure you send your express payment to the proper address. Many issuers have separate payment addresses for express payments. The last thing you want to do is slow the processing of an express payment by sending it to the wrong address.

No fee if you're "good"
Zapped with a late fee even though you mailed your payment well before the due date? Call and ask your issuer to waive the fee. Many issuers will waive late fees as a courtesy to customers with good payment records.

If all these fee-dodging strategies are too much for you, you may want to consider getting a card from a credit union or a local community bank. Smaller card issuers are much more lenient when it comes to penalty fees.

Late fees at community banks range from $10 to $15. Community banks also accept card payments 10 to 15 days after due dates without penalties.

Credit unions give card customers plenty of leeway as well. Generally, a credit union will accept a card payment 10 days after a due date without penalty. And if a credit union should charge you a late fee, it will only be $10.50 on average.

[cashlenders]

Over-the-limit fees
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.


Credit card companies have strapped on the brass knuckles. You'll need to be extra careful with your card to avoid bruising penalties. Bankrate.com can show you how.

Let's start by taking a closer look at the super-harsh penalty policies of credit card issuers. The numbers aren't pretty.

According to the 2001-2002 survey by Consumer Action, a San Francisco, Calif.-based consumer advocacy organization, late fees ranged from $10 to $35. The average late fee is $29. A handful of issuers, including Fleet Bank, have started charging $35 late fees.

Seventy-two percent of issuers surveyed�up from 68% last year�said they would hit cardholders with a late fee if their payment was not received by the due date.

Let's not forget about the big one-two punch. One slip up and some issuers will slap you with both a hefty fee and a penalty interest rate. Ouch.

Just how long a penalty interest rate lasts depends on your cardholder agreement. Some issuers punish rule breakers for a set period, say, two billing cycles. Other issuers are more vague. If you mess up you could be stuck paying a sky-high penalty rate for quite some time.

Needless to say, you can save yourself a whole lot of cash and a whole lot of stress by playing by the rules set out in your credit card agreement.

Unfortunately for customers, playing by the rules is a lot tougher than it used to be.

Gone are the days when issuers allowed 10 or 15 days for a payment to arrive after a due date before charging a fee. And thanks to dwindling grace periods, customers have less time to pay bills after they arrive in the mail.

How to avoid penalties

You've got to be quick with that card payment to avoid a penalty. If your payment arrives one day late, you'll be punished. These card payment tips can help.

Follow payment guidelines as outlined by the issuer on the back of each credit card bill.

Use the preprinted envelope provided by the credit card company.
Include the billing coupon, and be sure to write the amount being paid in the box provided.

Make sure checks are legible and the payment amount is correct.

Sign the check. Write the credit card account number on the check.

Send payment with proper postage at least one week in advance of the due date to the payment address requested by the issuer.

Consider online bill paying. Most issuers now accept online payments.

If the due date is looming, consider sending the payment by express mail or wiring the payment with Western Union. These express services may prove cheaper than paying a late fee.

Another good strategy is to adjust your payment due date. Many card issuers will let you set your own due date if you just ask. Why not time it so your credit card bill arrives right after a paycheck? That way you'll have plenty of cash to pay your bill each and every month.

With so many issuers charging so many different kinds of fees, it's more important than ever for consumers to study card offers carefully.

If you're sick and tired of credit card fees, you may want to consider getting a card from a credit union or local community bank. Smaller credit card issuers have not jumped on the fee bandwagon.

Late fees and over-the-limit fees at community banks usually range from $10 to $15. Unlike some larger issuers, you won't be charged an over limit fee if you exceed your credit limit by $1.

A card customer would have to exceed a credit limit by 10 percent before a community bank would charge a fee. Community banks also accept card payments 10 to 15 days after due dates without penalties.

Credit unions give card customers plenty of leeway as well.

The typical credit union will accept a card payment 15 days after a due date without penalty. Late fees and over-the-limit fees at credit unions are roughly $10.50 on average, according to Credit Union National Association.

[cashlenders]

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.


Q. How do cash advances from a credit card work?

Many consumers are unaware that every time they use their credit cards to withdraw cash, extra fees kick in:

Cash advances carry an upfront fee of 2 percent to 4 percent of the amount advanced.

They have a higher interest rate than regular card charges.

They carry no grace period; interest charges begin to mount as soon as the money spits out of the ATM.

Many issuers also require you to pay down the balances for purchases before you pay down the higher-interest cash advance balance.

"Using cash advances is like borrowing money when you can't afford it," says Steve Rhode, president and co-founder of Myvesta.org, a nonprofit group providing help for difficult financial problems. "You're setting yourself up for failure. It's convenient, and people don't care about the fees associated with it."

The fees and charges applied to cash advances are not hidden fees. By law, card issuers are required to disclose information about fees and charges associated with all of their services. This information is typically displayed on the back of the solicitation form and on the monthly statements.

Card issuers say they have two reasons to charge the additional fees. Cash transactions cost more to process than regular credit card purchases, and there's a higher frequency of default among frequent cash-advance users. The higher costs and increased delinquency risk are passed along to the consumer.

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.


By concealing important agreements in tiny print, raising rates on a whim and charging big fees you'd think credit card companies were making enough money. Apparently, they disagree.

Check out what Bankrate reporter, Lucy Lazarony uncovered this year.

Just how crummy are some of today's credit card offers? Check out this Visa card offer from Plains Commerce Bank. You pay $79 just to apply for the card. Once approved, you'll have to shell out an acceptance fee of $225, an annual fee of $50 and a monthly participation fee of $6, for a total of $281. The card's initial credit limit is $300. So when you receive your card the available credit will be just $19. When you add up all the fees, you've paid $360 for a credit line of less than $20. It's hard to imagine a more expensive credit card.



But at least the terms of the Plains Commerce Bank Visa are easy to understand. Its ghastly fees are spelled out in black-and-white. Getting a handle on the AmeriOne MasterCard from First National Bank of Central Texas is a lot tougher. This card comes with a membership fee of $39.95, a set up fee of $50 and a monthly maintenance fee of $9.95. So the initial cost of the card is $99.90. Here's the strange part.

Your credit limit is determined by how much additional money you send in. So first you make a payment and then you're free to spend with the card. Send in $30 and you're free to spend $30. It's a pay-before-you-spend card. The minimum monthly deposit you can make to the card is $15. Toss in the monthly maintenance fee of $9.95, you end up paying $24.95 for the privilege of making a $15 purchase with the card.

It turns out the AmeriOne MasterCard isn't a credit card at all. It's a super-spooky and super-expensive debit card.

Even supposedly premium card deals may have consumer-unfriendly terms, such as eye-popping $35 late fees. Citibank, MBNA America, and Discover will charge a $35 fee to any credit card customer with a balance of $1,000 or more who misses a payment deadline. Fleet Bank charges $35 for any late fee, regardless of balance. Yikes.

The horrors don't end there. Bankrate readers flooded our office with tales of intentional sabotage.

The great shuffle
My credit card company offered me a good fixed rate several years ago so I transferred two balances from higher-interest cards. About eight months later, a company representative called me to offer me an increase in my line of credit, based upon my payment history and asked if I like to transfer some more balances? Sure! Good news, I thought, and happily transferred some other high-rate debt. Then, about six months after that, they informed me that they were raising my rate to 20.9 percent.

I'd never missed a payment or paid late and always sent more than the minimum payment each month. Their decision was based upon my FICO score, which was the same as it was when they offered me the credit-line increase.

When I protested and asked to go back to the original deal, I was transferred from person to person with each one suggesting I send a letter to plead my case. And, it was next to impossible to extract the correct address for which to send my appeal. Every person I spoke with was quick to repeat the company line to appeal in writing. If this isn't predatory lending, it doesn't exist.

Beware of balance transfers
A credit card company sent me a mailing offering a new card at an attractive rate. They said I could be eligible for up to $28,000 in credit and offered a good rate for balance transfers. I applied for the card, and since it was part of the application, I applied to transfer about $18,000 in balances. Apparently, the company decided they couldn't give me the full $28,000 worth of credit but only gave me $14,000. They then transferred $14,000 worth of balances, instead of the $18,000 I'd requested. Since that transfer put me at my credit limit, the first time I used the card for a charge, they hit me with a charge for exceeding my credit limit. All of this in the first month I had the card!

New addresses reap profits for credit card companies
For the past several years, my credit card payment was automatically sent out the first of each month through my online bill paying service at my bank. I enjoyed the lowest rate, 4.75 percent, all that time.

This past August the payment did not clear my bank until the 20th of the month even though it went out at the regularly scheduled day of Aug. 1. I discovered this when I was charged a late fee on my credit card bill. It turns out that there was a new address for payments and since I use the online bill pay, I didn't notice it. So, it went to the old address. And, it was not processed timely.

I changed the address in my banking system and the credit card company even agreed to waive the $29 late fee since it was a processing error. However, the next month, they increased my interest rate to 19.99 percent because I had made a late payment!

After arguing with the company, the best they could do for me was to reduce it to 9.99 percent -- still unacceptable. Imagine how many customers they do this to by changing their mailing address periodically. I am going to close my account and pay the balance with my line of credit. This is the thanks they show me after eight years of business.

[aquariancore]

I thought the new regulations prevented charges, fee and expirations on the gift card.

[nangel78]

I think they can still charge a monthly fee for gift cards. I have heard of this still happening.

[mamab]

This is a huge reason we paid off all our credit cards. If I HAVE to get a loan, it will be a conventional one. I won't go back to a credit card again! The fees and interest are crazy.

[Melizzy]

I've had my Target Visa card for 6 years. For five of those years I was not late once. I then had brain surgery (trying to activate the disability was pure HELL) and was late twice in 6 months. They cut my limit and upped my rate. They cited the lateness "history." I cited 5 years of on time payments and an illness that couldn't be helped.

[Calypso]

This list is extremely helpful. I kinda knew these things about credit cards in the back of my mind, but I have never seen it all spelled out so clearly before. Makes me glad I'm not messing around with high-balance cards anymore. The one I keep for emergencies and pay off every month is the only one I need.