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Card Surprises to Look Out For


Credit card issuers have to make a profit. No one objects to that. But when they do it by hiding or disguising what it really costs you to use a card, that's not right. Here are some ways you could be paying more--unknowingly--for your credit cards than you need to:

1. Retro rate hikes. Teaser rates, low in the beginning but rising after six months or so, are a popular way for card issuers to attract new cardholders. Did you know, though, that often, when the low rate expires, any balance you have on the card jumps to the new rate, not just new purchases?

2. Costly cash advances. Often, there's both a finance charge (interest) and a transaction fee for cash advances--even if the ads say "no finance charges." You owe interest from the day you take the advance--no grace period--and the transaction fee may be as high as 2% to 5%.

3. Phantom fringes. Cards offering benefits like percentage discounts, rebates, or purchase protection have been cutting back on those benefits--often without notice.

4. Grace is gone. Multi-feature, high-limit cards sound great but may not have a grace period. If the issuer charges interest from the date you make a purchase, these cards are expensive even if you always pay in full each month.

5. Grace is iffy. Most cards having grace periods charge interest on new purchases if you carry a balance. So if you're counting on a grace period, pay your bill in full each month.

6. Grace is brief. The typical grace period is 25 days, but some issuers are closing the window between your purchase date and when interest applies.

7. Interest gotcha. It's not uncommon for a card issuer to charge interest from the day it posts your purchase to your account. But some now actually charge from the day of your purchase--meaning they charge you even before paying the merchant for you.

8. Bi-cycle billing. Two-cycle billing means the card issuer charges two months' interest the first month you don't pay your full balance. This occurs only when you've formerly paid in full and then carry a balance.

 

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Copyright 2008 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.