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A day late does not mean a dollar short
If you're a day late you get a fee, a dollar over your limit, you get a fee. Did you ever wonder why if it's over the limit it was approved to begin with? Sure you have a limit on what you can charge but they'll let you go over the limit, knowing you probably won't be able to make a full payment, you get interest charges, over-the-limit fee, and next month you pay interest on last month's over-the-limit fee, and then the next month you pay interest on last months interest on the previous months over-the-limit fee. Want to go over your limit? No problem, your friend will be there to help you out.
I recently heard that 31% of credit card company profits come from fees. And now there are new fees for balance transfers and overseas transactions. So exactly what kind of friend do you have here anyway?
The Universal Late Fee
Ah, this one is becoming an ever increasingly popular entry into the fine print. And to activate it all you need do is be late on a payment, late for any bill, anywhere and for any reason. According to this fine print addition to the credit agreement if you area late on a payment and it shows up on your credit report your interest rate will rise. If you never missed a payment with your credit card company but you were a week late paying the gas company, too bad, you lose.
You’ve just triggered the "universal default" clause. Don't worry it can only cost you hundreds of dollars a year. Why, because it wouldn't be unheard of for your interest rate to be raised to 29.9%. Oh, you liked your 12% rate but too bad. By having just one payment arrive late, even if it wasn't your fault, you can now pay more, much more, for years to come. Ah, who knows what evil lurks in the fine print? Well some sneaky credit card executive does, that's for sure.
You've been pre-approved.
There was a time that credit card companies sent out tons of letters telling us that we'd been pre-approved for a credit card. They might mention a credit limit, like $5,000. But in the fine print it said that you must meet their credit requirements. So if you returned the application and your credit report wasn’t that great you’d get a credit card, but one with a much smaller limit like $200.
But now they are getting much more creative with the wording in their solicitations. I just received on that said I’ve been pre-selected. Pre-selected for what? I’ve been pre-selected to apply for a loan. Oh boy! In the fine print it stated that information in a pre-qualifying report from a credit bureau had been used to determine my eligibility. It then informed me that I could remove myself from these types of offers by calling 888-567-8888. This number will work for you too.
I’ve been pre-approved! Again! Oh Boy! I’ve been pre-approved for a Gold MasterCard. I can have Gold Card Prestige. And my card will be accepted wherever I see the MasterCard logo. Well this is exciting! Let’s look at the fine print.
First there’s the program fee, $95.00, and the account set-up fee, $29.00, the annual fee, $48.00 and the participation fee, $72.00. Well that adds up to $244.00 in fees. What’s the credit limit? $250.00. And to be nice, just in case I don’t have $244.00, they’ll put the fees on my new card. Maybe I’m not happy having only $6 left on my new card. I could always apply for a credit limit increase, it only costs $25.00. If I’m in a hurry for my card, they’ll send it priority 2-day mail, $25.00. If I need an extra card, it’s only an extra $20.00. If I want to use Autodraft, it’s $11.00. I can have access to my account information via the Internet, $3.95. Of course if these fees put me over my credit limit there’s a fee of $25.00 and another $25.00 fee if my payment is late. Ah, the privileges of prestige. I think I’ll pass on this offer.
A Check for Me!
Here’s an interesting piece of mail. It came in a self-contained tear-open envelope that looked like an official document. It even had a seal with an eagle on it. It told me in large print that a check was enclosed and a new Visa or Mastercard had been reserved for me.
There was indeed a check for $3.25. In order to cash my check I needed to provide them with a credit card number and authorize a payment of $89 a year on an ongoing basis. What did I get? Well I got an application for a credit card, some coupons, a wallet calculator and a no-risk guarantee. In addition I received a free personal credit report. They also provided me with registration of all my credit and debit cards. This was to be used in case my cards were lost or stolen. I could then call them and they’d call my banks and credit cards companies to notify them of my situation.
So is this a scam? Well they do provide a service and whether or not it’s worth it to you is up to you. Just don’t be fooled by the official looking presentation and the check. And, as always, before you commit to anything, read the fine print.
Your Credit Card Cardholders Agreement
Here are some typical sections of a cardholder agreement; of course, they do vary so it is a good idea to read your agreement before you sign it. Yea right.
Spending Limits and Credit Line The is no preset spending limit, but each charge will be evaluated based upon the cardholder's credit history and the lender's understanding of the cardholder' current finances. The credit line may be increased, reduced or cancelled at any time.
Applying Payments If there is more than one interest rate on the account, payments will go towards paying off the balance with the lowest rates first. Interest continues compounding on the balance with the higher rate. (This is especially important if you do a balance transfer and then use the card to make a purchase or cash advance.)
Default Rates The highest interest rate may be charged if the cardholder is late making a payment to any creditor; this can include phone and utility bills, car payments and the like - even if credit card payments are made on time. (I recently heard of a case where a man had his interest rates raised to the max because his credit card company found out he had missed a payment, six years ago. There will be no warning and it probably cause your minimum monthly payment to double.)
Grace Period If the balance is zero at the start of the billing period, the cardholder does not have to pay finance charges on purchases if the balance is paid again by the next due date. If not, interest accrues from the time of purchase. (So you could have been charged for thirty days of interest before you even get the bill.)
Fees There's the annual fee, the late payment fee, the over the limit fee, the bounced or unsigned check fee, the copy of a statement fee, the payment by phone fee. (And if you can think of one they don't have yet just tell your credit card company and I’m sure they'll be happy to add it.)
The Right to Sue Any dispute between the cardholder and the issuer may be resolved only by binding arbitration. The cardholder cannot take the issuer to court or be included in a class action suit against the company. (This should be called No Right to Sue, and it should be avoided.)
Terms of Agreement May be changed at any time for any reason. The cardholder will receive notice by mail. The changes will affect the current balance; use of the card constitutes acceptance of the new terms. (Yes, they can change anything at any time for any reason. They can raise your interest rates, add fees, reduce days between when you receive your bill and when it’s due or anything else that they can think of.)
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