Misleading Credit Cards and Questionable Practices

Questionable practices by card issuers bring billions in profits making credit more costly.

It used to be that consumers used credit cards for mainly big ticket items- a vacation, a new appliance, airline travel. How times have changed! Today, more and more low and middle-income individuals and families depend on credit cards for everything from food and gasoline to medical emergencies and unexpected financial needs.

With the current state of the economy and a still high unemployment rate, consumers who are already reeling are finding themselves in even more perilous financial situations. Much of this is due to the credit card industry’s manipulative use of teaser interest rates, penalty fees, and other questionable practices which generate billions of dollars in profits annually.

The truth is, most consumers don’t take the time to read all the fine print that comes with a credit card agreement. It’s no accident that the wording of these agreements is lengthy, confusing, full of legal terminology, and literally printed in tiny, hard-to read letters. The credit card industry is counting on consumers to literally sign these agreements blindly. This allows the issuers to impose hidden fees and penalties.

The Credit Card Act of 2009 did provide much needed, consumer-friendly changes to the way credit card companies are allowed to operate. There are some simple things that every consumer can do and should be aware of that can help pay off balances earlier, save on interest payments, and improve their overall credit.

First off, pay more than the minimum amount due every month. Depending on your total balance, many times the minimum amount doesn’t even cover the interest payment. The more you are able to pay each month reduces your balance more quickly and lessens the interest paid.

Secondly, check the interest rate on each statement. Credit card issuers can raise your rate for nearly any reason, so try to pay more than is required and pay on time. Be aware that higher rates can be imposed on both new purchases and cash advances.

Finally, refuse the “over-the-limit” coverage option. While it sounds like a nice safety feature, the additional credit given to you when you exceed your limit can come with an exceptionally high interest rate. A smarter move would be to ask for a credit line increase or apply elsewhere for another credit card with a lower interest rate.