According to an article at U.S. News & World Report, there are five nasty practices that consumers do not know credit card companies engage in. They all cost consumers extra money and can affect people's credit scores, yet many people are unaware of these practices. Those five practices, as well as some additional cash grabs, are:
1) Universal default - Universal default occurs when a person is late with a payment for a bill or goes over limit on a credit card but has interest rates hiked on a different credit card. Although some companies have said they will no longer use universal default, it is still a common industry practice.
2) Retroactive charges - Credit card companies that choose to increase a customer's interest rate can also apply that rate to past charges. This means that anything that still appears on a customer's credit card can be subjected to a higher interest rate, even if it was purchased months ago.
3) Double-cycle billing - Also known as two-cycle billing, some credit card companies charge interest on the average daily balance of two months rather than one. For a customer who has carried a balance from one month to the next but still paid part of the amount owing, this means that he will pay interest on the portion he paid as well as the portion he carried over.
4) Grace periods - Customers may think they have a 30-day grace period for paying for an item without interest; however, this is only true for customers who pay the bill in full. Even if one percent of the bill is not paid then interest will be charged on 100 percent of the item.
5) Payment charges - Many companies now charge a fee for customers who pay by the phone or use online payment methods.
6) Payment due times - Some companies not only have a payment due date but also a due time. Customers that are even a few minutes late are charged a late payment fee.
7) Multi-tiered interest rates - Some credit card issuers charge different interest rates for purchases, cash advances, balance transfers and other transactions. However, they may apply a payment to the transactions with the lowest interest rate first, allowing higher-interest balances to sit on the card.
8) Over-limit fees - Credit card companies approve transactions that will put a person over their credit limit and are then charge an over-limit fee for that transaction, rather than having the transaction declined. Furthermore, over-limit fees are being charged in instances where the credit card company has charged a fee to the card (for example, a fee for a late payment) that has put the card over the limit or in cases where the interest rate has suddenly been increased, thanks to universal default, and the new interest charges put the customer over-limit.
READ MORE LEGAL NEWS
An article in the Argus Leader gives an account of a man who was approved for a credit card with a $250 limit but First Premier automatically charged an up-front fee of $178, reducing the credit line to $70. The man canceled his cards, but First Premier still imposed finance charges, causing his balance to skyrocket to $1,000.
Lawsuits are being investigated against credit card companies who use unfair means to generate revenue. If you have been hit with a sudden unfair rate hike, contact a lawyer to discuss your options.