It's almost as if the credit card companies get some kind of perverse pleasure in making credit card agreement terms and conditions so mind-bogglingly complicated that almost no one can fully understand them. Sure, many people don't even bother reading all of the legal and financial jargon, but those of us that care about what we're getting in to would like to see the inclusion of some plain english in some of these things. Add to that the ridiculous increases in late fees and other penalties and you can see why the credit card companies are raking in the cash. Be careful!
Late Fees & Other Penalties: Through the mid-1990's the typical late payment fee was around $10. Now it's about $40. Over-limit fees? Over $30 on average. Why the increase? Higher profits of course!
Balance Transfer Fees: Although common in the past as an attractive incentive to entice new customers, you're lucky if you can find a no-fee balance tranfer these days. Most companies charge 3% of the transfer balance, up to X amount of dollars (X being typically $50-$75 or so). But recently a new trend has arisen: doing away with the cap. So it's 3% of the total, no limit. Makes those balance transfer options a little bit less enticing doesn't it?
"Guess The Interest Rate": When applying for a credit card you'll see that many cards have no set interest rate (APR) stated on them. All you get is a range…and it's usually quite a wide range. 8.99-17.99%??? That's a big difference! Add to that the fact that interest rates can change from month to month based on the "Prime Rate" (among other things, such as recent credit history changes). And of course, you don't know where you fall into the range until you get the card in the mail.
The "Up To…" Scam: Apply now and receive 0% APR on all purchases up to one year! Apply now and receive 0% APR on all balance transfers up to one year! The keyword here is "up to". You see, depending on your credit history, the computer algorithms at the credit card issuing centers, and the phase of the moon at the time, that potential one year could be shortened to as little as three months.
How APR Is Calculated: There have been recent changes to the way some credit card companies calculate interest payments on your card balances. This changed from the Adjusted Balance method (where your previous statement's balance is figured along with any payments and then is multiplied by the monthly interest rate) to the Average Daily Balance method (where they track your daily balances and then add up the average of the daily balances at the end of the month and multiply by the monthly interest rate). The latter is obviously advantageous to the credit card companies as it results in higher interest payments.
International Transaction Fees: We have to pay a 3% surcharge just for the priviledge of using our credit card overseas? Ridiculous. It doesn't cost them any more money to process payments made overseas than it doesn in your home country. You (well, Americans) used to be able to get around this by making overseas purchases at stores that processed transactions in US dollars. Not anymore! Many agreements specifically state that the 3% fee is charged no matter what currency the transaction takes place in.
