More Credit Card Fees

A few weeks ago, The Early Show financial adviser Ray Martin told us about the increasing number of fees associated with credit cards.

Martin is scheduled Thursday to discuss the issue further. He also will speak about a handful of credit fees and scams to be on the lookout for.

Martin says credit card companies are continuing to raise fees and add new fees. In fact, card companies are expected to earn about $1 billion in late fees and other penalty fees this year alone. This is hitting consumers where it hurts most -- their pocketbooks.

Readers of Martin's cbs.marketwatch.com column and Early Show viewers have written him to share their bad experience with credit cards.

Although viewers had a variety of complaints about their credit card companies, three complaints stood out.

Shrinking Payment Windows

Many complained that their payment due dates were changed without any notice. Dates changed from the end of the month to the middle of the month; or from the first of the month to the end of the previous month. This is a result of shrinking payment windows.

A decade ago, you had 31 days to pay your credit card bills. That time between your statement date and payment due date (the "grace period" where you don't have to pay finance charges or interest charges) has continued to shrink and is now around 21 or 20 days. More often than not, Martin says your payment must arrive the morning of the due date.

To make matters worse, if you don't mail your payment in the preprinted return envelope, some card-member agreements allow the card company to record receipt of your payment five days after it actually arrives.

Changing Interest Rates

One woman wrote Martin that her rate was jumping from 9.9 percent to 19.98 percent. Another woman's rate was changing from 13.49 percent to 22.99 percent. Martin says these increases might make sense if the card users were consistently late with payments or overcharged their accounts. But, all of the consumers who wrote about this problem said they were good customers.

Turns out, Martin says, credit card companies are now increasing rates if you are late on other types of payments such as if your overall debt levels increase, if you have high "revolving debt," if you have too many credit accounts or if you consistently make only the minimum payments on your accounts.

Balance Transfer Woes

Many cards charge a fee of three percent or more on balance transfers. Martin had letters that said, in many cases, this fee was the least of their balance transfer woes. Often, cards will appeal to potential customers by advertising a zero percent or low percent interest rate on any balance transfers. If you apply for one of these cards, you typically have a higher interest rate on any new purchases made with the card. Some, however, complained that when they mailed in payments, the money went toward paying off the balance transfer amount (the low-rate portion of their balance), not the new purchases. Thus, their higher-rate debt accumulated interest longer. So, the low percentage rate on the balance transfers winds up not being such a great deal after all.

Credit Card Complaint Letters

The following are a few other credit card fee complaints Martin received. He addressed them on The Early Show.

A purchase from a Canadian company showed up on my credit card statement along with a 2 percent foreign transaction fee. This fee has never occurred before.

Yes, it's true. More card companies are charging you a fee for using your card overseas. You may not even realize that this is happening because the fee is often embedded in the exchange rate you're shown on your statement. Look for it in the fine print of your cardholder agreement.

In the past, travelers believed that credit cards were safer than carrying cash, more convenient than traveler's checks, and gave you the best possible exchange rate. Should this new transaction fee make you think twice about using your card overseas? Probably not. Martin says, it's worth your while to check and see if any of your cards charge a lower fee, and use that one.

You forgot to mention one of the latest fee traps: credit protection. Every card offers and pushes this. It seems like a scam to provide more fees for the card company.

The idea behind most of the these credit protection services is that you pay a fee and the card company will alert you to potential problems with your account such as fraud or identity theft. The services are not a scam, but they may be unnecessary. The Fair Credit Billing Act limits any liability to $50 for unauthorized transactions on your card. Plus, some cards such as Citibank and Providian are beginning to offer customers free identity theft protection services. In general, Martin says, many of these programs sound like an expensive add on. They may bring you peace of mind, but they provide little value beyond that.

Martin advices to read any offers for these services carefully, so you know exactly what you're getting for your money; insure that you aren't already getting this assistance for free. If you're concerned about identity theft, you should find a way to safeguard your whole credit profile, not just one card.

I recently paid my balance off in full and on time. But when the next bill came, it contained a $3.64 finance charge. I called to inquire and was told this was a "residual finance charge." How many cards charge this?

Unfortunately, this is not an unusual fee. And, it's within a card company's rights to charge it. As Bankrate.com explains, "That bold-print number on your statement, called the payoff balance, is obsolete by the time it reaches your mailbox." Often, between the time you send your payment and it reaches the card company, your balance has acquired a finance charge. You are required to pay this charge. Keep in mind that you will only experience this problem if you have carried a balance in the past and then attempt to pay off the card entirely.

Martin says avoid this problem by calling your credit card and saying "I would like to avoid residual interest. Can you tell me what I'll owe 10 days from now?" The service representative should have a calculator built into their system, which can calculate this amount. Also remember, consumers who pay their cards in full each month will not have to pay residual interest.

Martin says following a few tips can help avoid unnecessary credit card fees.