If you use your credit responsibly and pay your bills on time, then it’s natural to expect that your credit card company will treat you well in return, right?
Not necessarily. A few years ago, I opened my credit card statement to discover that my interest rate had tripled overnight. I made my payments on time, I didn’t have a large balance, and I had a great credit score, but there it was … a whopping 22 percent.
Even in the best of times, card companies are always looking for ways to make money off of us. With credit markets so unpredictable nowadays, they are not above using underhanded tricks and unsavory techniques in order to squeeze out every last dollar. Because of the increasing number of credit card defaults, banks are passing the losses off to their customers in the form of hidden charges, new rules, and outrageous fees. Knowing what kind of tricks to watch for can help ensure that your own wallet doesn’t get taken for a ride.
1. Unexpectedly Raising Your Interest Rate
According to most cards’ terms of service, the lender can raise your interest rate any time they want, especially if you have a high balance or your credit score drops. Credit card companies use information from all parts of your credit report to determine the rate they charge you, including your housing history and your records with other lenders. That means that if you get a few months behind on Card A, Card B will raise your interest rate, even if you’ve been paying them on time. Basically, they’re just looking for any excuse to charge you more money, and if you have even one delinquent account, all of your creditors can (and probably will) raise your interest rate.
2. Changing Your Payment’s Due Date
It’s hard to plan your monthly finances when your credit card payment is due on a different date each month and credit card companies count on this confusion. Sometimes it’s due the 4th, sometimes it’s as late as the 8th, and customers are stuck with a late fee every time their payment doesn’t make it on time, even if the due date falls on a weekend. And whether your payment is late by a few hours or a few weeks, the charge is the same. This tactic has become even more widespread now that more and more people use online banking and automatic payment services.
3. Lowering Your Credit Limit
Just because your card originally had a $5,000 limit doesn’t mean it always will and now more than ever, companies are re-evaluating how much credit they’re extending. Arbitrarily decreasing available credit doesn’t only affect your ability to make purchases, it can also negatively impact your credit score by making your cards appear to be maxed out. Credit companies have even been known to lower credit limits beneath a customer’s current balance, which triggers overdraft charges. Then once your credit score falls, they can raise your interest rate.
4. Selling You Fraud Protection
Think your bank is just looking out for you when it offers you its credit monitoring or fraud watch service? Think again. Credit card customers are never liable for more than $50 of any fraudulent transaction, so it’s okay to decline any additional coverage they might try to sell you. Fraud protection is part of every basic credit card agreement, and no matter how hard they try to scare you into buying it, it’s not worth paying an extra yearly fee for.
5. Cascading Fees
Credit card companies charge fees whenever a customer breaks the terms of service (like paying late or charging over the limit), but the rules are cleverly designed so that breaking just one sets off a cascade of other fees and penalties. Going over your account limit results in a penalty for every month you’re over, even if the bank lowered your limit in the first place. Or if you’ve racked up late payment fees, the card company may take the opportunity to raise your interest rate. As with many items on your credit card’s terms of service, breaking one rule can affect your account in multiple ways.
How You Can Fight Back
Whenever a card company changes its terms of service, they’re required to notify you in writing, so don’t throw away any mail from your credit card company without reading it. Those densely-written booklets packed with confusing credit jargon aren’t just junk; they’re the company’s way of informing you of the changes they’re making to your account. The best way you can protect yourself from sneaky tricks is to stay on top of your credit, because banks do their best to keep customers in the dark. Keep track of your interest rates and balances so that when changes happen, you’ll notice them right away.
If you see that your company is trying to pull a fast one on you, you can call customer service and voice your protest. They are often willing to negotiate with customers in good standing, so if you’re current on your account, politely ask them to refund the fee or reverse the change in terms, all the while reminding them of what a good customer you’ve been. They’ll usually give you a free pass on your first late payment, and will often refund fees and reset interest rates. Sometimes it’s even helpful to threaten to transfer your balance to another card, because ultimately, they want your money, no matter what it takes to keep you as a customer.
Credit card companies may seem too big to fight, but it always feels better to plead your case. No matter what they try to put over on you, it’s worth trying to negotiate with your card company to get the best deal. The worst they can say is no and if you’re a conscientious consumer, any other bank will be happy to have you—as well as your credit card balance.