Bankruptcy

Watch out for these Ridiculous (but Legal) Credit Card Fees

By guest-writer

Since the passage of the Credit CARD Act and its full implementation this summer, consumers have been protected in some important ways from the credit card industry. But, as Credit.com reminds us in this post about absurd credit card fees, there are still plenty of credit card industry practices to be wary of.

Here?s a look at some of the fees you should watch out for (and avoid, if possible) if you?re in the market for a credit card.

• Hefty upfront or activation fees: Though the CARD Act limited how high initial fees can be on credit cards, many issuers are still charging upfront and/or activation fees. One industry insider has apparently defended these fees as legal because many issuers assess them before an account has officially been activated, meaning that they can?t contribute to the card?s limit.
• Credit insurance or protection: This credit card charge is reportedly designed to allow consumers to stop making payments if they lose their job unexpectedly (but, one would assume, it would not stop any interest from accruing on the balance due). Naturally, it?s not free, and, according to Credit.com, your credit card issuer may not even tell you that you?re paying for such ?protection? ? you have to check your bill to determine whether you?re forking over cash for this. And, if you are, consider calling your card issuer to cancel it.
• Inactivity fees in disguise: Because the CARD Act forbids credit card issuers to charge inactivity fees (that is, charges for not using a card), some companies, it seems, have done little more than renamed their inactivity fees to keep them alive. Some cards apparently charge ?annual fees,? which consumers don?t have to pay if they charge a certain amount each year. If you use your card very little and don?t think you?ll reach the annual fee limit, you may want to close the account.
• ?Pick-a-rate? interest rates: This practice, according to Credit.com, is particularly nefarious because it can go undetected by individual credit card holders ? it doesn?t cost individuals very much money, but, when applied to millions of accounts, earns a hefty chunk of change for credit card companies. What essentially happens is that credit card issuers charge a slightly higher interest rate than usual ? your best bet is to avoid cards that have this language in the agreement: your interest rate ?will be the maximum prime rate reported in the 90 days preceding the last day of the billing cycle.? An ordinary interest rate will be signified in your contract in this language: your interest rate ?will be the maximum prime rate reported on the last day of the billing cycle.?

The bottom line? Watch out. Even though federal law protects your consumer rights to a certain extent, it?s still essential to read all the fine print and make sure you understand the terms of your credit card before you sign anything.

Full post as published by The Bankruptcy Blog on November 17, 2010 (boomark / email).