Everybody’s out to make a buck these days. And truthfully, there’s nothing wrong with that.
We all have to eat—right? With that said, there’s a huge difference between making an honest buck and scamming people out of their hard-earned income.
While none of the strategies outlined below are illegal per se, they do fall solidly under “seriously man?” In other words, these four sneaky credit card tactics to avoid are just this side of being unfair.
1. Credit Limit Increase Fees
According to AOL Finance, that seemingly benevolent credit limit increase you just got might well have come with strings attached.
Their report cites the situation with Best Buy’s RewardZone MasterCard issued by HBSC.
“In the fine print you’ll find you could also be charged a fee for requesting a credit limit increase that equals a whopping 50% of the increase amount.”
In other words, if you’re granted a $1000 credit line increase to help you get that 4K UHD OLED TV set you’ve been eyeing, they have the right to hit you with a $500 fee—which immediately makes the price $500 higher.
What’s more, that $500 is also subject to interest charges if it isn’t paid off in one billing cycle.
2. The If/Then Scenario
The Motley Fool documents the following situation:
“If you send in a late payment on one card, some of your other cards may begin charging you a higher interest rate. Similarly, if you’re approaching your credit limit on one card, you may see rates rise on one or more of your other cards.”
In other words, IF you demonstrate any shakiness at all on one of your cards, THEN some issuers will raise your interest rate on their card—even if you’ve never exhibited any such issues with them.
3. “Rewards” With a Catch
Money Talks News exposes the downside of those glittering rewards offers that so often frequent mailboxes:
“You might see an offer of $150 back or 25,000 airline miles just for opening an account. (But) in many cases, you’ll need to ring up a certain amount of charges on your card within a specified time period to qualify. The fine print will require something like $1,000 in purchases to get that $150, or $2,000 charged to earn 25,000 airline miles.”
While the details vary, completing these offers as stipulated may be difficult or even impossible, depending on your budget
Further, when you do the math, accepting those offers can sometimes be more expensive than simply getting the benefit of the “reward” on your own.
4. Residual Interest
The practice of ghost balances is disclosed at CreditCards.com:
“Close a credit card account without looking at the final statement. The small balance left behind — often a dab of interest or occasionally a fee for making your final payment by phone — can grow to a monster in no time once the domino effect of late fees, default APR and interest get rolling. The most common ghost in a closed account is residual interest; that is, interest that was generated between the time the bill was issued and your payment was received.”
Because of the way grace periods work, the statement balance and actual balance can be two different figures.
If you pay off your statement balance and think you’re done, the additional interest on the actual balance will be left behind and begin to take on a life of its own.
Your Debt Will Grow
All of these tactics will result in more debt.
Furthermore, the cumulative effect of these tactics can put you in a situation in which your debt becomes unmanageable. If this has already happened to you, working with an organization like Freedom Debt Relief can help you regain control of the situation.
Bottom Line: Read Before You Write
These sneaky credit card tactics reveal the importance of reading cardholder agreements very carefully. While the law requires disclosure of all of these actions, if you sign without reading, there’s not a whole lot you can do.