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  • MINIMUM NOTICE CHANGES - If the above is not bad enough, consider the consumer with on time payments every month on everything. No problem, right? WRONG! Buried within the contract (that contract law attorneys admit they have great difficulty interpreting), is a clause that allows the company to change your interest rate "at any time, for any reason, as long as the holder is given 15 days' notice."That's right. They change their mind AFTER you make a purchase at 6.5% for example, and former agreements are null and void. How can a purchase price be changed after the sale? No other industry can do this but the credit card company can.
  • USURY OR NOT - According to Frontline, "There is no federal limit on the interest rate a credit card company can charge."In fact an interest rate of 35% is not unheard of. This is because in the 1980s South Dakota and Delaware eliminated the cap on usury laws which is what constitutes the maximum allowable interest to be charged. Have you ever noticed the return address on your credit card statement? Chances are it is Delaware or South Dakota. Gee, I wonder why.
  • DEADBEATS and REVOLVERS - Deadbeat use to mean someone not taking responsible action. This is not true in the upside down credit industry. In credit card bill jargon, "Deadbeats"pay their balances off in full every month. They are deadbeats because the industry receives very little profit off of these responsible consumers. On the other hand, "Revolvers"roll credit card balances over month to month and never pay in full. This is the ideal customer because of the profit generated. Then there are "Rate Surfers"or "Gamers"who shift usage between credit cards based upon interest rates.
  • FEES - Again quoting Frontline, "In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted the existing restrictions on late penalty fees. This means simply, there is no limit on the amount a credit card company can charge a cardholder for being even an hour late with a payment."But this has opened a Pandora's box for not only late fees, but over the limit fees and bad check fees as well. A lawyer who worked on the Smiley case says he believes penalty fees which use to be $5 or $10 could rise to $50 in another year. Now the consumer not only must contend with a higher rate, but late fees as well. Additionally what if these fees put them over the limit creating still another fee. It is a never ending spiral towards bankruptcy.
  • MINIMUM PAYMENT - Consumers use to be required to pay 5% of the outstanding balance. But slick credit card marketers suggested implementing a 2% required minimum payment. This was advertised as consumer friendly with "easy low payments."The truth is, the tactic allowed consumers to increase their debt because of the lower payment which in turn created more profit through higher debt over a longer time period. Check out my article Balance Transfers and find out how much interest you pay on a minimum payment on $5000 during the 20-41 years you are making minimum monthly payments. (The average household US credit card balance is $7500 to $8,000.)




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