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The Dirty Dozen Credit Card Traps
careonecredit.com — Credit cards are the most lucrative segment of banking, and not just because of the interest charges. Everyone in the industry wants to sell you a credit card. Don't be fooled by the offers. We present a dirty dozen traps and tricks used by credit card peddlers to fill their pockets and empty yours.
wildcatter- 717 diggs
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- rene71, on 10/10/2007, -4/+12I found this article to be very informative!
- Rustbelt, on 10/10/2007, -0/+1Great article. I know a lot about credit card companies and their games but this really opened my eyes. Very informative.
- HaltingPoint, on 10/10/2007, -0/+1I find you to be a spam account created to just post to this story, along with a couple other accounts created for the the purpose of posting comments to try to get this to the front page:
http://digg.com/users/joedaclub/news/commented
http://digg.com/users/excessrevenue/news/commented
Whatdya know...first post is from a fake commenter account, second is from the story poster and third is from another fake commenter account. Check out which stories they've dugg too. Wouldn't be surprised if he owned the company that sponsored this article...
- wildcatter, on 10/10/2007, -2/+18Thanks, we worked hard on the research to put it together. Glad to know someone appreciates it :)
- maffiou, on 10/10/2007, -0/+3Very comprehensive... It's even worse than I imagined, and I wasn't expecting a lot... Sheme on them, the poorer you are the more you get ripped off !!
- maffiou, on 10/10/2007, -0/+3Very comprehensive... It's even worse than I imagined, and I wasn't expecting a lot... Sheme on them, the poorer you are the more you get ripped off !!
- joedaclub, on 10/10/2007, -1/+13It’s amazing what credit card companies get away with.
- excessrevenue, on 10/10/2007, -0/+3Very interesting. Default APR at 35% is pretty terrible.
- Error601, on 10/10/2007, -1/+4Yea, all the sneaky stuff that's printed right in the agreement.
- slayerab, on 10/10/2007, -2/+2I love credit cards, its pretty much free money I earned (j/k)
- theexit, on 10/10/2007, -1/+9I work for a credit card company, and pretty much all that stuff only happens if you have bad credit. Cash advances are the worst thing you can do with a credit card, high interest daily right away, and its mark on your bureau as cash adv which is extremely high risk to lenders thats why high interest on it. Also, the more "prestigious" the card, the higher the annual fees are. All you need is a basic card with a decent loyalty program and you're fine. Were in Canada so it may be somewhat different as we have to obey Bank of Canadas legislation for credit cards, but interest rates increase on ppl with bad debt, bottom line. You pay more then the minimum each month, no late payments, no overlimits, and pay off your balance in a few times a year, and you will have no problems. Though all that info is true, it sucks if you get screwed over, but its avoidable.
- listrophy, on 10/10/2007, -0/+2Speaking of "working for a credit card company," the sneakiest ploy I've ever encountered involves paying college freshmen to sign up their buddies. Basically, an "employer" somehow gets a bunch of freshmen together and offers something like $5 per application. These kids then go back to their dorms and sign up every last person they can find. The pitch is "If you sign up, I get paid. Also, you pay nothing and can just cancel the card right away."
Seems like a solid plan... except there are always the few kids who don't cancel them. Not to mention that those canceled credit cards show up on your credit report for a long time. It's been 7 years, and the ones I signed up for and canceled are still showing up.
- listrophy, on 10/10/2007, -0/+2Speaking of "working for a credit card company," the sneakiest ploy I've ever encountered involves paying college freshmen to sign up their buddies. Basically, an "employer" somehow gets a bunch of freshmen together and offers something like $5 per application. These kids then go back to their dorms and sign up every last person they can find. The pitch is "If you sign up, I get paid. Also, you pay nothing and can just cancel the card right away."
- donbradken, on 10/10/2007, -2/+2I don't think it's as much about getting screwed over as it is basic education. This is a good resource for the average joe who doesn't have a lot of finance experience... and doesn't fully understand what all the details are about
- Rustbelt, on 10/10/2007, -0/+2Education is a good point. We should definitely teach more practical economics in schools. Most parents never had anyone teach them and the ignorance passes down from generation to generation. I know I would have avoided some mistakes with a semester class focusing on credit cards, mortgages and bill paying.
- benitojuarez, on 10/10/2007, -1/+23I have found you can get through life just fine without a credit card. Just a debit card will do. As long as you pay your mortgage/rent and utility bills on time you will have good credit. The best rule you can live your life by financially is, "If you can't pay in cash, you can't afford it and don't need it". Of course every rule has its exceptions such as a home or car purchase. But if you save up the 1800 dollars to buy that ginormous flat screen hdtv you will save more in the long run and wont have to worry about making a payment in the event life takes a ***** on you one month. And the best part, your money won't be wasted. Even 1% in interest fees adds up and thats all interest is, wasted money.
- Urusai, on 10/10/2007, -0/+3I follow the same rule. Just make sure you have a running balance in the bank in case of problems. I usually try to keep $1000 or so. You can get better checking accounts if you do that, too.
- NewOntario, on 10/10/2007, -0/+6This is yet another reason why I have little to no interest in credit cards. I've worked in electronic retail and have seen people orgy out thousands of dollars for the "latest" in tech items that really don't have much a difference. I've also seen friends of mine go into debt because of credit cards.
It's funny when this conversation occurs (often) in my life...
Person: "You don't have a credit card?"
Me: "That's right"
Person: "Why not?"
Me: "I already use Auto-Purchase for all my transactions. Using Auto-Purchase is the best. It eliminates any worry of the transaction appearing in a monthly statement. This method has been around for many generations and is available to everyone."
Person: "What's Auto-Purchase?"
Me (Smiling): "Cash."- MiDri, on 10/10/2007, -0/+1I'm finding a lot of places don't take cash anymore... it's starting to freak me out... (Normally only places that you have contracts with.)
- EarlR, on 10/10/2007, -0/+0Communist!
- quaxon, on 10/10/2007, -0/+4what happens if you have a bunch of credit debt and fled the country? do the creditors follow you around the world?
- Tmax88, on 10/10/2007, -0/+1I imagine it would depend on how much you stole and the treaties between the two countries, but in general I think they turn non-paying accounts over to a debt collection agency which will assume certain assets are non-recoverable and take the hit. When I was in canada I used to hear of guys from Bangladesh and Pakistan doing this when they were studying there. Don't know the truth to it though.
- HollowMarkeD, on 10/10/2007, -0/+3This article shows why a good rule of thumb to do with credit cards: if you transfer a balance to a 0% offer DO NOT use that card for anything else. Put it away, freeze it into an icecube, anything, but avoid putting any other charges on that card since you'll have to pay off purchases at high interests rates before you start paying off your balance transfer.
- psykiv, on 10/10/2007, -0/+1Freeze it into an Ice Cube? Hmm... Interesting... BRB.
- Rustbelt, on 10/10/2007, -0/+0I just did this. It took a year to pay off a large balance and the whole time that card was locked in a box so it couldn't be touched. As soon as the last statement arrives showing a zero balance I'm chopping that sucker up.
- Nocturnal, on 10/10/2007, -3/+6This is why you pay your damn balance off each and every month so even if you have a high APR you will never pay a cent towards interest!
- jonnyboyca, on 10/10/2007, -1/+5i work for a major CC company... the things they can get away with.... amazing!
- sloppychris, on 10/10/2007, -0/+3Another credit card related tip I've picked up is what they can be good for: amortization of a large, necessary purchase over a few months. As long as you don't put what you buy regularly like groceries on a card (if it is, re-evaluate your budget), the credit can be useful. That said, I don't have one and have no plans to get one.
- AnotherBrian, on 10/10/2007, -0/+4This is what I do with every credit card offer I receive in the mail. It makes me feel all warm and fuzzy inside.
http://www.thebestpageintheuniverse.net/c.cgi?u=junk_the_junk- Tabris, on 10/10/2007, -0/+1No you don't because they don't always pre-pay postage for mailing it back.
- AnotherBrian, on 10/10/2007, -0/+1They don't prepaid the return postage. They only pay for the actual number of envelopes returned. There are tracking codes that the post office scans instead of the stamp and charges the postage to the credit card company's account. Plus they have to pay people to weed out the fakes.
- Tabris, on 10/10/2007, -0/+1No you don't because they don't always pre-pay postage for mailing it back.
- prthealien, on 10/10/2007, -1/+2This article has depressed me enough to never apply for a credit card again.
- lifeat24fps, on 10/10/2007, -0/+4It must suck being so completely irresponsible that you can't make even a 2% minimum on time and have to incur penalties for violating an agreement you chose to enter into. Boo-hoo. Nobody forces anyone to sign up for the cards, and the terms of the cards are right in front of you while you're applying. They only get away with what you already agreed to let them get away with.
- Braeden, on 10/10/2007, -2/+0I might agree with you if the terms in front of you are what you actually get. But as I point out in my rant below, it's just not the case. They have absolutely no legal obligation to commit to those terms. The terms can be changed for any reason at any time to take advantage of the American consumer. Bank of America is an expert at this.
- Rustbelt, on 10/10/2007, -0/+0Yeah but the article is trying to educate people so they don't get into those situations. Some people just aren't very good with money. With other people it's computers or cars. You can't be an expert at everything.
- lifeat24fps, on 10/10/2007, -0/+1Yea, I understand. I wasn't being critical of the article so much as I was the replies about the companies "getting away" with something. Educating yourself about the terms of the card is an excellent way not to end up in a bad situation. Still, if you're going to sign up you have to expect the card company to hold you to what you agreed to (and if you agreed to a card with a wildly variable APR and high fees you should expect the company to take advantage of too).
- lawrencekhoo, on 10/10/2007, -2/+2Listen up people!
Always pay off your credit card bills in full. If you need credit, go to the bank and take out a loan. Get a mortgage. Buy stuff on installment. Borrow money from your parents. Pawn your watch.
But never ever use the credit on your credit card. You'll end up paying more than double cause of interest charges and fees.
Don't do it! - piratearggghhh, on 10/10/2007, -0/+5These are modern day loan sharks. The trick is to make the system work for you and pay your full bill off each time with a cash-back CC like Amex Blue Cash. I made $110 last year carrying a zero balance. It's really up to the individual to stay on top of your finances - basically don't buy ***** if you don't have the money (Something this country needs to learn looking at our national debt).
- psykiv, on 10/10/2007, -0/+1Too bad its only really worthwhile if you spend a lot every year. You only start accumulating 5% after you spend $6500, and only on certain items, and it resets at the end of the year. The 1.5% on everything else is better than anyone else though.
Are there any 5% (for life, not that 6 months crap) cards left that don't require you to spend $6500/yr just to start getting rewards.? - Rustbelt, on 10/10/2007, -0/+0Cash is a beautiful thing.
- onthedrums, on 10/10/2007, -0/+1I have the AMEX Blue Cash card and I use it for EVERYTHING. Gas, groceries, concert tickets, laptops....etc I got back $1200 last year, this year i think I'll be getting back close to $1800. I pay it off every month and only had 1 month where I had to let some of the balance roll to the next month. I cut up all of my other credit cards.
Credits cards, like the Lottery, are a tax on the poor.
- psykiv, on 10/10/2007, -0/+1Too bad its only really worthwhile if you spend a lot every year. You only start accumulating 5% after you spend $6500, and only on certain items, and it resets at the end of the year. The 1.5% on everything else is better than anyone else though.
- psykiv, on 10/10/2007, -0/+3The sad thing. I have been looking at so many credit cards lately, I can name some of those cards, just by looking at the terms.
Eg. The one with the $450 annual fee is the AMEX Platinum.
The first one is an HSBC Platinum Mastercard (the cheapest bastards ever when it comes to credit limit, I don't know ANYONE with a CL higher than $1k on an HSBC card).
The second one is the HOOTERS card (yes, hooters has a credit card...)
The third one is some credit union's card.
The fourth one is the Generic Form for FNBO credit card (Makers of the World of Warcraft Credit Card)
#6 is Some POS card from Orchard bank
#7b is Plains Commercebank. They only give you a $250 limit too.
9. Really, like 99% of cards do this...
10. The same one as #3
11. See #9
12. I've seen minimum payments range from 1% to 5% and 100% (Charge cards)
With that being said, they missed one. My mom received a credit card offer in the mail the other day. I was bored, so I looked over the terms. There was a 50% fee for Credit line Increases. E.g. If you ask for a $500 increase, the fee is $250. Seriously, wtf.- DangerMouse9, on 10/10/2007, -0/+0So if you ask them to cut your limit in half do they pay you? Since the increase is a negative amount and then the fee would be half the negative amount meaning you'd get a credit. :)
- Braeden, on 10/10/2007, -1/+2Dugg for absolute truth. Unfortunately, one dozen traps don’t begin to cover the gamut of predatory, underhanded practices employed by credit companies.
BANK OF AMERICA IS EVIL. A small list of its evil practices is on Wikipedia here: http://en.wikipedia.org/wiki/Bank_of_America_controversies. I've experienced much of it first hand.
Biggest check first: They post the largest purchases first and deposits last in order to artificially inflate the likelihood that you'll incur and overdraft charge. See http://en.wikipedia.org/wiki/Overdraft#Transaction_processing_order for an example. They claim that processing largest purchases first helps the customer by insuring important purchases are prioritized, yet they make sure that the money you put in to cover those purchases is credited as late as possible.
Trailing interest: See http://www.consumeraffairs.com/news04/2006/10/bofa_trailing.html. They charge you interest each day until your payment is received. This means if you simply pay the entire amount shown on your last statement, you’re not actually paying off your balance. Furthermore, Bank of America does not provide a straightforward means to figure out your payoff amount on their website. You have to call in and get customer service to “estimate” what it’ll cost, pay the estimated amount, and then watch your account and see if you paid too much or too little. It’s completely absurd.
Arbitrary changes in terms: Forget about the terms they advertise for credit cards; they can change them whenever they want and for any reason. For example, they might decide to stop offering your current rate if you ever use your card again. So, they’ll amend the terms and send you notice in the form of what appears to be junk mail (not that receiving the notice matters, they’ll change the terms regardless). Then, the documentation of the change in terms won’t be reflected anywhere, not even on your statements— just that piece of junk mail. So, you’ll think that nothing has changed, use the card, and then get a tripled interest rate. The new rate is applied to your existing balance, not just future balances. It’s they’re favorite way of instantly F’ing customers over.
Pay-to-pay: You call in to make sure you’re paying off that entire balance and they charge you $15 to make that payment over the phone. w. t. f.
Universal default: Late on a car payment? Took on too much debt? Got too much credit? They’ll penalize you for being American and having to take on unrelated changes in your credit history.
I’m no longer a Bank of America customer, and I encourage you to take your business elsewhere like I did. They’re “Bank of America” because they’re a huge part of the American debt crisis. Americans can’t keep their heads above water because we can’t even cover cost of living without funny money from predatory corporations like Bank of America.
There are new legislation proposals out there to curb this crap:
Stop Unfair Practices in Credit Cards Act
by Sen. Carl Levin, D-MI, and Sen. Claire McCaskill, D-MO
http://www.senate.gov/~levin/newsroom/release.cfm?id=274257
Credit Card Accountability, Responsibility and Disclosure (CARD) Act
by Reps. Mark Udall, D-CO and Emmanuel Cleaver, D-MO
http://www.congress.org/consumeraction/issues/alert/?alertid=9524216
I encourage you to voice your support for reform. We can’t let Bank of America and other corporations continue to prey on American consumers. We’re a nation strapped in debt, and there’s a grotesque debt business that is growing rapidly because of it. Go watch the documentary Maxed Out (http://www.maxedoutmovie.com/), get as pissed off about this stuff as I am, get yourself out of debt, and help change things.
< /rant>- wildcatter, on 10/10/2007, -0/+0Good stuff Braeden
- FSBO, on 10/10/2007, -2/+0I found this article to be very informative!
- rzrshrp, on 10/10/2007, -1/+3I'm sorry but everything on this page was too obvious. Though I guess that it's helping someone avoid fees so it's ultimately good. The things that Braeden posted about such as universal default are the really tricky ones that few people know about. I've been doing my best to work credit cards instead of the other way around for at least five years. I signed up for a 0% balance transfer for a year card with discover. Used it to pay down my debt...and then I closed it. They made 0$ off of me. There wasn't even a transfer fee. I've done the same thing multiple times, sometimes to pay off debt, sometimes to just put in a savings account to make free interest off of thousands of dollars that a CC company let me borrow for free.
Yes, I know that practices like that can mess up your credit score but I don't plan on buying a house for at least four years and until then, my credit score is fine for everything else. - bravo1995, on 10/10/2007, -1/+1If you're smart about credit cards, they can be a great tool. I've made hundreds of dollars off my cash back credit cards and have never paid a cent in fees or finance charges in my entire life. The key is to find a card with no annual fee and some kind of reward mechanism, and pay it off in full, every month, without exception. It's not that hard.
You can also pay off some old high-interest credit card debt by taking advantage of those 0% balance transfer APR promotions. The key is to only transfer what you know you can pay off within the promotional period, because some companies will retroactively charge you interest for the promotional period if your balance isn't paid off by then. It's not the kind of thing you do when you want a plasma TV, but it can be a smart way to pay off some debt interest-free.
If you're smart about credit cards, they can be great tools. You just have to stay on top of them and pay them off every month, without exception. That's how I get those assholes to pay me instead of the other way around. - dreesemonkey, on 10/10/2007, -0/+0Good article. I'm just shocked that people can't remember to pay their bills on time to avoid getting their rates jacked unbelievably high. They can't afford to my that $30 minimum payment on their balance of $1500? Sheesh.
The article only really centers on the fees and interest rates, but Maxed Out goes a bit more in depth. For instance, how they prey on young (college students), or those with bad credit. They make the most money on people who can't pay their bills. When someone stops paying their bill, they get to turn it over to a collection agency "taking the loss" on their P&L statement, and then selling the debt to the collectors. It's freaking shady as all hell.
Check out Maxed Out (documentary) if you want to learn a bit more, and personally I'm way into the Dave Ramsey 'plan' right now of becoming (and staying) debt free, both are highly recommended.- Tabris, on 10/10/2007, -0/+1To be fair, I racked up about 1300on my card at the beginning of the Summer to build an HTPC and some other things, and the minimum was like $80 initially :x I've been paying it off in chunks of a couple hundred, though, and you cant go wrong with 10% interest...if I default it goes up to 35% though.
- FOUGHTANDWON, on 10/10/2007, -0/+0Dugg for the Dave Ramsey program. Even though the dude is making tons of money with his system, it really does work for people who are in serious credit trouble.
- dreesemonkey, on 10/10/2007, -0/+0You can learn his 'system' just by listening to the radio show every day. By this point I know exactly what he's going to say to the callers. I still bought the book to read, and eventually bought 4 more as gifts. So far my sister and roomate are both huge fans, I've been giving some away as wedding gifts as well.
It's amazing that before I could have never imagined paying cash for cars or other expensive items, now that I actually watch my spending I've been putting nearly half my takehome pay each month on my last debt. I'll be freaking rich with no payments! ;)
- dreesemonkey, on 10/10/2007, -0/+0You can learn his 'system' just by listening to the radio show every day. By this point I know exactly what he's going to say to the callers. I still bought the book to read, and eventually bought 4 more as gifts. So far my sister and roomate are both huge fans, I've been giving some away as wedding gifts as well.
- bravo369, on 10/10/2007, -0/+0I do think Congress or someone has to get involved and stop these practices. At least get companies to present clear terms of service and get rid of stupid fees like inactivity fee. So if i don't want to charge anything because i don't have money to pay, i get charged anyway? that makes absolutely no sense to me.
Yes these rules are over the top but i also have to blame some people if they fall into it. Don't charge if you can't pay, don't pay the $35 minimum on an $800 bill. Seems like common sense but i guess not. - donquixote235, on 10/10/2007, -0/+1I learned my lesson regarding cash advances about three years ago. I had just gotten a new card, and had hit a financial dip, so I got a $400 cash advance to hold me until I could get paid. After two years I was still paying the interest on that $400, even though I had been paying an average of $300 a month since then. Apparently even though other charges were tacked on later, it applied the payments to the lower-interest charges rather than to the higher-interest cash advance, so that $400 cash advance was not technically paid off regardless of the fact that I'd cycled over $7000 in payments since then.
My lesson? Cash advances suck, and should only be used when ABSOLUTELY necessary... and if you do, be sure to pay the entire card down before charging against it again. - atbnet, on 10/10/2007, -0/+1I don't see how these are 'traps' unless you are a retard and don't read anything and apply blindly. The ones with the excessive fees (annual, monthly, misc) are for people with bad credit. You can avoid the default rate by simply *GASP* paying your ***** bills on time. It isn't a trap since it can be avoided if you have an ounce of common sense. But to those who do fall in the traps, thank for for paying for all my rewards and sign-up bonuses. Without you, I couldn't rake in all the free money from credit card companies.
- phoephus, on 10/10/2007, -0/+2http://www.youtube.com/watch?v=MxFx0NzSjWw
- JavaApe, on 10/10/2007, -0/+1Most credit card companies are predatory on their clients -- it's basically just another way of sticking to those can ill afford to sue for relief, and our bought-and-paid-for government is doing nothing to protect the sheep from the wolves. For the record, I have one credit card carrying a small balance which I intend to pay off in full next week. After that, I'm shredding the card. However, I've been "gotten" by several scams:
1) Transferred a large balance to a 0% interest card. Sent the first payment by mail THREE WEEKS early, and it wasn't credited until the day after it was due. Bam, instant late payment and high interest rates. I can't PROVE when the check got there, and they charge $10 for the privilege of paying electronically.
2) Set up automatic monthly payments with another card carrying a small (~$500) balance, and pretty much forgot about it. The credit card billed on a 30 day cycle. Every time we had a month with 31 days, I moved one day closer to being late. Naturally, when I slipped over the line they didn't write me a letter, they just quietly doubled the interest rate, added late fees, processing fees etc. Once they had me up to something over $1000 they started dinging my credit rating, which is how I found out about the little scheme.
All the advice about "Don't buy what you don't need, stupid!" and "Just pay it off every month" isn't practical for most people. Most Americans live paycheck to paycheck, and when disaster strikes (like anything medical-related) they're up a creek without a paddle. Fortunately, my wife and I have been blessed to get good jobs and dig our way out of that hell, but not everybody can do that in today's world. That's a bit like telling starving people "Just go to McDonalds and get a happy meal."- joedaclub, on 10/10/2007, -0/+0You are absolutely right. Great comment
- SkylerWoolsey, on 10/10/2007, -0/+0Each of our acts makes a statement as to our purpose.
- jadewolf, on 10/10/2007, -0/+1I could boil this article down to a few concise words, read the contracts, know what you are getting into (be it credit cards, a local cable subscription, or even a cell phone contract), if you don't agree with it then DON'T DO IT. I mean honestly people do realize that those agreements that come with those shiny plastic cards are contracts, right?
- JayGatsby, on 10/10/2007, -0/+0For more information on the hidden fees and predatory lending practices of the credit card industry, be sure to check out http://www.unfiarcreditcardfees.com. There is a ton of great information, particularly on merchant interchange fee that costs Americans $30 billion annually, and the site even has a form that lets you email your representatives in Washington.
- Chita, on 10/10/2007, -0/+0Someone mentioned above that bad credit/change in your credit gets you higher interest rates. Period. I don't think it that black and white. There are plenty of people complaining that their interest rates were changes with no change in their credit history. Just an example: http://complaintwire.org/Complaint.aspx/DI96aAoHJQAMNwjJl2KvLw
http://complaintwire.org/Complaint.aspx/hFvTKz7r5wAmzgjJlfQYrg - EricGiguere, on 01/25/2008, -0/+1One thing that got missed was the use of transfer fees when you move one credit card (or loan) balance to another credit card. A charge of 3% for doing so is often tacked on to the balance, kind of like the credit card advance fee mentioned in the article. Ouch! See http://www.nodebtisgood.com/credit-cards/credit-ca ... for what I mean.
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