4 Little Catches Credit Card Companies Should (but Don't) Tell You About

Last Updated Feb 10, 2011 11:17 AM EST

Consumer Action, the non-profit financial education group, has just competed its annual creditcard survey, and it is full of juicy information. One of its key findings: the CARD Act, which became law a year ago, goes a long way toward protecting consumers by requiring issuers to provide more information upfront about the true cost of a credit card.

However -- and it seems that there is always a "however" -- some information, as Consumer Action put it, "you won't find but still need to know." So, thanks to them, I'm telling you now about four gotchas that could get you:

  • Sneaky Sundays. If your payment due date happens to fall on a Sunday, the CARD Act says that as long as your money arrives by 5 p.m. on Monday, you are free and clear -- UNLESS your card company processes mail on Sundays. If it does, you are out of luck and get dinged with a late fee. You would never know this even if you studied every word of the tiniest mouse print in your cardholder agreement because issuers don't bother to disclose it. Consumer Action suggests that you call your card company and ask -- just so you know.
  • Paying-to-Pay Payments. Before the CARD Act, some companies charged $10 to $15 for online payments. That is now a no-no UNLESS you need the help of a customer service rep and the payment must be expedited, in other words, paid within 24 hours. But none of the issuers in Consumer Action's survey disclosed this last-minute payment fee. And, by the way, if the payment is expedited and it still doesn't reach the company by 5 p.m. on the due date, you are out of luck -- and out the fee.
  • The Interest Rate Whack. If you are 60 days late in paying your bill, a credit card company can not only increase your rate but also apply it to the balance you're carrying. (Otherwise, rate increases only apply to future purchases.) Consumer Action notes that sales materials will warn you about late fees, which you will obviously incur if you are 60 days late, but you will only learn about the rate increase thingie from the cardholder agreement. That doesn't come in the mail until after you've signed up. Tip: Don't be 60 days late.
  • The Clueless Student. Under the CARD Act, issuers aren't supposed to grant credit unless they have verified that a potential cardholder has the ability to pay. Lenders are supposed to rely on pay stubs and tax returns for proof, but since people under age 21 don't always have those, card companies are allowed to use algorithms and models provided by credit bureaus. (And we know how well that worked during the housing bubble.) Some consider student loans income -- a pretty dangerous proposition. The larger problem is that few issuers tell students what they need to qualify. Or that if they don't meet income guidelines, they can recruit an adult co-signer on the account. If at all possible, those under 21 should stick with debit cards to avoid the miasma of debt -- at least until they graduate.
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