Sneaky tricks that credit card companies use

Char Telkamp

Char Telkamp

Credit card companies 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.

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 further 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.

Musical address

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.

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.

The company may gave you a card with a much lower limit and after transferring as much of the balance as possible from the old card, hit you with an over-ther-limit-fee the first time you use the card.

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 two to four percent of the amount advanced. And your payments will be applied to the lower-interest balance before they are applied to your cash advance.

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.

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.

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.

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.

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.

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.

This trick isn’t limited to the credit card industry, either. Persistence pays off – but it’s exhausting.