Newest Credit Cards Are Consumer Traps – Be Careful
They tempt you with 0% balance transfers for long periods of time. They try to attract you by offering rich rewards programs. The reality is today’s credit card offers are more abusive than ever and are nothing more than a trap.
When applying for a credit card, most consumers read the one page terms and conditions. However, that is not where the real details lie. The real details are in the cardmember agreements. This is a much larger document. However, the credit card companies don’t make these readily available. They send this to you in the mail after you already have the card. If you use the card once, you have agreed to the terms of the contract. I can sum it up this way.
If you make one mistake, you can actually ruin your credit and have legal action taken against you. Here is a sampling from one of the Citi-cards cardmember agreements.
Penalty APR. If you have a Late or a Returned Payment, we may apply a penalty APR to your account. We determine your penalty APR based on your creditworthiness. (That is pretty standard.)
Closing or Suspending Your Account. We may close or suspend your Account if any of the events listed above occur, or for any reason, or for no reason. We may do this at any time, without notifying you, as allowed by law. We may cancel your current card and issue you a substitute card at any time. If we close or suspend your account, or if you close your account, you must pay us all amounts you owe on the account, even if they post to your account after it’s closed or suspended (my underlining for emphasis).
This section provides that disputes may be resolved by binding arbitration. Arbitration replaces the right to go to court, have a jury trial or initiate or participate in a class action. In arbitration, disputes are resolved by an arbitrator, not a judge or jury. Arbitration procedures are simpler and more limited than in court (this protects the credit card company – the consumer rarely wins in arbitration cases).
Collection Costs. To the extent allowed by law, you’re liable to us for our legal costs if we refer collection of your account to a lawyer who isn’t our salaried employee. These costs may include reasonable attorneys’ fees, as well as costs and expenses of any legal action.
So, let me get this right. A credit card company can close your account at any time without even a reason, charge you penalty rates if you are late with your payment, demand that you pay in full at any time, and then if you have a complaint against them take away your right to try your case in a court of law. Oh and if they declare you in default and demand payment and you cannot pay, they will put you into collections and you will be responsible for all of the attorney fees that occur while trying to collect your account.
Credit card agreements are the only consumer contract where the deal can change at the whim of the credit card company. Is it any wonder they don’t make the details readily available?