He?s anonymous, but his advice resounds through the ages ? most recently in the words of Stuart Clode, senior vice president for marketing at Aberdeen Proving Ground Federal Credit Union.
“The guy who first invented the phrase ?caveat emptor? [let the buyer beware],” Clode said, referring to the hidden dangers of credit card use in a market where, reportedly, 6 billion credit card offers were mailed in 2005, “knew what he was talking about.”
And what this unknown pundit was talking about ? when it comes to credit card use in America, where the average revolving debt is now $9,000 per family and the industry?s 2004 profits from fees was $46 billion ? is legion and often lurking in fine print.
It includes balance transfer teaser rates as low as zero percent that soon revert to much higher rates; small-print penalties and consequences for late payments or delinquencies on other, unrelated accounts; and ? unbeknownst to many consumers ? credit score consequences when an account is closed in favor of another.
And, as happened recently to one consumer with a major credit card company, a phone payment fee being quietly applied to the consumer?s high-interest credit card account instead of to the checking account that the monthly payment was debited to.
But this is still just scraping the surface. Other pitfalls include: not using secure sites ? sites with “https” versus just “http” in the URL, according the www.creditcards.com ? when shopping online; not scrutinizing statements for “spam” charges ? unauthorized, small debits by thieves; making only minimum payments; not reading the literature?s fine print, especially the prominently displayed “Schumer Box;” and not paying debts on time.
“Folks need to know that it?s a temporary interest rate,” Allen Cox, director of the Maryland Coalition for Financial Literacy, said of the issue?s most obvious problem ? credit card teaser rates, “that usually lasts a couple of months … before reverting to the rate that the issuer wants it to be, which might be 18 percent or higher.”
And despite the seeming exploitive nature of the practices, they?re legal in many states.
“Did you ever wonder why your payment for the credit card you got from the bank down the street is mailed to South Dakota or Delaware?” Clode said, homing in on a crucial factor.
“These states have no cap on the penalty default rate, so the banks charge whatever they want ? and they do,” he said.
