- Your rates are raised without warning
You may have been paying your bill in a timely fashion, but if you fall behind in payments to another creditor or if your credit score drops for any reason, it can trigger a jump in the rates on all of your credit cards. Even more surprising: If you charge close to your limit without exceeding it, your rate can jump too.
- Your due date changes
Don’t assume that your check must arrive at the same time every month. Some banks have been accused of abruptly switching payment due dates. Others may try to trip you up by specifying that your bill is due by a certain time of day on the due date. Many banks have narrowed payment periods from 31 days to 20 days.
Keep in mind that if even one payment is late, banks can raise your interest rate to as high as 28% as a penalty. Average late fees for large banks rose from $19 in 1995 to $35 in 2007.
- Extra charges and penalties
Card companies tack on significant fees for all sorts of services: cash advances, balance transfers, conversion of foreign currency, paying off your balance by phone, and more. Going above your credit limit may trigger the biggest penalty of all, leading to rates of more than 30% a year.
- Misleading introductory rates
Your mailbox is probably filled with offers of alluring low-interest credit cards—3%, 2%, 0%. These rates are usually just come-ons, and they may jump to as high as 30%. And it gets even worse. If you transfer a balance to a card with a 0% promotional rate, you may soon learn that the 0% rate applies only to the balance you transferred, while all future purchases accumulate at a much higher rate. And when you make payments, they’re applied to the debt with the lower interest—so the higher- interest debt keeps building.
- Mandatory arbitration
When a credit-card company claims you owe money, your legal rights are limited. At least 75% of cards have clauses that say disputes must be resolved in private arbitration forums, according to a recent survey. So when a disagreement arises, a consumer can’t take it to court—a serious issue if you’re a victim of identity theft.