What Credit Card Companies Don’t Want You to Know
The devil is in the details. For credit cards that is the fine print. Unfortunately, you don’t get the real fine print until after you received the card. You think that you did. After all, you read the one page agreement that gives the details. That is only a 10th of what you need to know. The real document is the 18 page card member agreement which is mailed to you after the fact. That describes exactly what they can do. What is worse, you agreed to it when you signed the dotted line.
Here is what you need to know:
How do they apply your payment? A lot of credit card accounts have debt at two different interest rates. For example, let’s say that you have 5,000 at 15% and 5,000 at 10%. They will take the minimum payment and first pay the interest charges. Then they apply the rest of the minimum payment to the LOWEST interest rate debt to insure you will stay in debt as long as possible. Only if you pay more than the minimum payment will it be applied to the higher interest debt.
They can declare your account is in default if you don’t make your payment or if you are late. Generally speaking, once in default you risk going to collections and have damaging effects to your credit report.
I’ll just quote Citibanks agreement – “We may close or suspend any reason or for no reason. (yes I didn’t make that up) If we close or suspend your account, you must pay us all amounts you owe on the account”.
Some more straight forward details. “We don’t guarantee approval of Transactions. We are not liable for those that aren’t approved, even if you have enough available credit on your Account.”
Disputes are resolved by arbitration. In arbitration, you waive the right to go to court or participate in a class action suit. The consumer typically doesn’t fair well in arbitration. Further, you have to pay full legal costs of an attorney. They use arbitration agreements for a reason.
Remember that reward program you signed up for? “Any benefit, reward, service or feature offered may change or be discontinued at any time for any reason. Separate terms and conditions will describe any exceptions.” Where do I find those exceptions?
As if the above wasn’t clear enough, they add this language towards the end of the document. “We may change this Agreement for any reason and at any time, subject to applicable law. This means that we can change rates and fees that apply to your Account. It also means we can add, replace or remove provisions of this Agreement.”
Even the best of the best card companies subject you to these terms. Make one mistake and you’ risk dealing with a debt collector and destroying your credit.
The credit card landscape has a lot more risk than most people know. This is why credit card companies are not up-front. Chances are you will throw that agreement in the trash once you do receive it.