Tricks of the trade

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Tricks of the trade

Credit card companies are masterful at squeezing unwary consumers; here are ways to protect yourself

By Linda Stern
REUTERS

June 18, 2006

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Almost two years ago, then-comptroller of the currency John Hawke Jr. warned the national banks regulated by his office that it would take supervisory action if they engaged in deceptive practices. But there have been no actions taken by that office since then against any specific banks, according to the agency's own Web site. So, as is often the case in consumer issues, it's a protect-yourself situation. Here are some issues that those credit card disclosures raise, along with some possible solutions: What comes first, the terms or the application? Surprisingly, in most situations, it's the application. Most banks won't show all credit card terms until you've given them specifics about your Social Security number, your address and your income. That's so they can peg the exact rate, terms and conditions to your credit score and credit history.

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There are two ways to handle this. McHenry suggests not applying for cards that don't disclose all of their terms up front, but that's likely to make your list of potential lenders very, very short. Even those banks – like Citibank – that post card terms before you apply wont't tell you how big your credit line is going to be. If you're looking for a big balance transfer deal, that's an important factor. The alternative is to apply for several cards all at the same time, compare the deals you are offered and then cancel all but the one you like best. That's not likely to hurt your credit score much: To a seasoned lender, having several inquiries at the same time just looks like comparison shopping. But just in case, don't try this if you're about to apply for a home mortgage.

What are they hiding?

Here are some especially problematic terms that can be in your contract: Two-cycle billing. This uses two months of balances to come up with the average daily balance. It can be a big problem for borrowers who only rarely keep balances from one month to the next, because they'll end up paying two months interest for one month's debt. Universal default. This means your card company could raise your rates if you're late on somebody else's bill somewhere else.

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Due times, not just dates. Many, if not most, issuers now consider a bill late if it arrives on the due date after a certain time of day. Then you can get busted for being late, a situation that can jack up your rate to levels over 20 percent and add another $30 or more in fees.

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Individualized disclosures like that would let you know how long you'd have to make those minimum payments before you'd bust your balance to zero, and how much you'd pay in interest in the meantime. Don't hold your breath waiting for those statements. Go to an online calculator such as the bankrate Web site (http://www.bankrate.com/brm/calc/creditcardpay.asp) to get your own answer.


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