With the advent of new credit card regulations designed to keep credit card companies from engaging in the most predatory practices, the companies are very, very busy trying to find legal ways to keep making money in the exact same ways they always have: with confusing rules, crazy fee structures and unexpected interest rates changes. About the only effective part of the government’s regulation is the requirement that companies disclose when they are doing things to your credit card program that will make them gobs of money at your expense — but even then, their slick marketing teams are designing inserts and disclosure statements to make it all look shiny and happy.
What should you be watching for in your mail (and reverse if you fell for it)?
1. Opt out of opt-ins
Credit card companies — and banks that offer debit cards — aren’t supposed to approve charges if you are over your limit or your account will be overdrawn. Until recently, however, they would automatically allow an over-limit or overdraft charge go through without telling you, but with the extra fees attached to make as much money as possible. In other words, your credit limit wasn’t a limit — it was just an amount after which you would be charged a per-usage fee in the range of $35. Under the new law, you have to explicitly provide permission for them to charge you per-transaction fees for over-limit or overdraft use — so card issuers are asking cardholders to opt in to charges by making their practices seem all about their customers. I mean, you wouldn’t want to suffer the embarrassment of a declined transaction, but the Big Bad Government is going to force them to be mean unless you join in their shiny, happy fee-per-transaction program to spare yourself the humiliation of using a different card or paying cash!
2. Open every envelope, and read every page
Credit card companies aren’t stupid — they know you don’t read your mail. Under the new laws, they only have to inform you within 45 days that they are planning on raising your rates. But they don’t have to send a separate letter, or make it easy to understand! Regular Visa card users are likely used to the little legalese pamphlets that come with their statements, but American Express just prints changes to your terms and agreements on the back of the bill. And, although come August consumers can choose to not accept the terms of a new agreement and pay off the balance under the old terms of the agreement, August isn’t here for another six months. If the lead-up to February’s rule changes are any guide, the months prior to August will race by in a flurry of agreement changes while you don’t yet have the right to do anything about it other than pay off your card and close your account.
3. Don’t forget the fees!
Just like legislators who promise not to raise taxes but end up facing budget shortfalls, credit card companies are making up for revenue losses by raising fees since they’re often not covered by new regulations. From annual fees to paper statement fees to fees for non-usage, credit card companies are getting creative — and they’re hoping you’ll miss the fine print or forget to read your statement.
4. Watch out for the no-longer-fixed interest rate on some cards
It has been a time-honored tradition for banks to push consumers to take out adjustable rate mortgages, but credit card companies are just now getting into the game. Instead of just raising interest rates, they’re converting consumers to adjustable (called “variable”) rate cards from fixed ones. But whereas at least banks give you the impression that your rates might also go down when it adjusts, card issuers are creating cards with rates that only ever increase. The best part about variable rate cards is that, if the rate is pegged to the prime interest rate, they don’t have to notify you in the future when the rates go up. Handy for them, but bad for you.
5. Fees earn interest, so keep track of what you’re being charged
When companies charge fees to your account, if you forget to pay a card that you haven’t been using — but which comes with a fee — then the company gets to collect interest on the fee. One subprime card that carries a $75 annual fee for a $300 spending limit doesn’t require consumers to pay the fee to get the card: They simply issue the card with a $75 balance and, if the customer can’t pay it, start charging 59.9 percent interest on the fee. And, since analysts expect that some companies will charge consumers that fail to use their cards, the new fees you didn’t even see coming could come with hefty interest payments added.