Top 5 Tricks Credit Card Companies Play

Top Five Tricks Credit Card Companies Play

President Obama has vowed to go after credit card companies for some of the sneaky practices that consumers have complained about for a year, and the administration has called credit card company executives to the White House for a meeting Thursday.

Check out the top five tricks credit card companies play on consumers to charge them more money.

Retroactive Rate Increase

This is the No. 1 practice credit card customers complain about. Even if you signed up for a low-interest card, many banks reserve the right to raise your card's interest rateat any time. They can charge you the new, higher rate not only on new charges but on your existing debt as well. It's a real bait and switch.

Universal Default

This is when you fall behind on one bill, so all your other credit card companies use that as an excuse to raise your rates, even if your payment history with them is perfect. The credit card companies basically check your credit report, and if they see problems with other creditors, they zap you. With this and all these other practices, they say they are just taking steps to manage their risk.

Lowest Interest First

Say a bank charges you multiple interest rates for different portions of your debt because your rate went up after you made some of the charges when you had an introductory rate. Most banks apply your payments to the lowest interest items first so that the high interest part of your debt lasts longer and they make more money off you.

Due Date Trap

To earn late fees, some credit card companies give people only a couple of weeks to pay their bill. The really sneaky ones actually move the due dates around, or say the bill is due in the morning rather than the end of that business day.

Double Cycle Billing

This is when credit card companies charge interest on a purchase over two months instead of one. Say you made a $100 purchase, but you only paid $90 of it off. Instead of being charged interest on the $10 remaining, the card company takes the opportunity to charge interest on the entire $100, because a portion of it was not paid in full.

Fed Rules on Credit Card Industry

Consumers have been complaining about these practices for years. In December, the Federal Reserve passed new rules that will help curb them, but those rules don't go into effect until July 2010.

The Obama administration and Congress may now be more likely to force the credit card industry to make swift changes, because these are the same banks receiving billions in government bailout funds and Americans are hurting right now.

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