10 Credit Card Practices That I Disapprove
Alright, despite the fact that I’m always raving about certain cards and that I encourage students to get a credit card as soon as possible to build their credit, there are things that I dislike about credit cards and their issuers. Below are my top 10 pet peeves.
1. Sending too much junk mail – Yes, I could easily choose not to receive any junk mail from credit card companies. But because I’m Mr Credit Card, I really do go through each and every mail just to see if there is anything new or is there any new marketing tactic that these credit card companies come up with. I know a friend of mine who works in Chase and he says that their response rate on these credit card mailings is less than 1%!
Now, if instead of sending cards with 0% APR Balance Transfer Deals, I would warm up to a company if they sent me mails on how to improve your credit score, what to do before you apply for a credit card, how to avoid certain disputes etc. If they sent me some education materials, I would be much more receptive to their card offers. The credit card industry have a thing to learn from sophisticated direct marketing folks!
2. Sending Me Offers for Cards I already have! – Yes, even after I got my Chase Flexible Rewards Card, they kept sending me mails with the offer! Come on, sort out your computer systems and perhaps we’ll be more likely to open your next offer!
3. Sneakily raise fees – Remember the times when a late fee or an over-the-limit fee was just $19? Then it went to $25, $29, $35 and now $39 (the maximum fee so far). I’ve no doubt it will soon be $49! Credit Card fee inflation has sure been rising faster than the normal goods inflation!
4. Inconsistent Method of Balance Calculations – While companies like Citibank and American Express use the normal average daily balance method to calculate monthly balances, Discover Cards use the one-cycle and two-cycle methods. For example, all Discover Cards use the two-cycle method except for the latest Discover Motiva Card. Chase use to use the two-cycle method, but a few cards used the normal one-cycle method. Come on now, if you want to use the two-cycle method, then use it for all cards. Be consistent.
5. Removing Maximum Balance Transfer Fees – I think credit card companies realize it is a money losing proposition to keep offering 0% teaser deals. Heck, many people (taking advice from us pf bloggers) are doing the arbitrage – getting the 0% deal and putting it in an online bank like HSBC and earn a one-time higher yield! So rather than stop offering money losing 0% deals (cause no one wants to be the first to blink), some issers have decided to screw the consumer instead.
Bank of America for example have no longer any cap on their balance transfer fee. So if you transfer $20,000, you may be slapped with a $600 balance transfer fee! (3% of balance transfer amount). Some cards are sneakily doing that as well. Before you attempt a balance transfer, it is best you check with customer service and get the updated terms and conditions on this point! Citicards also have some cards with no cap on the maximum balance transfer fee!
See my post on Balance Transfer Credit Cards and Balance Transfer Fees
6. Having Different Fees for Different Cards – I’m not talking about annual fees here. Citibank is the most guilty of this. Different citicards have different maximum balance transfer fees. Some have a cap at $99, some at $250. Some have no cap, but waive the BT fee for the introductory offer. Not only are there different fees for different cards, they change the fees among the cards as well! I have no doubt they are conducting some kind of marketing test. But this is clearly absurd. I’m sure lawsuits will arrive.
7. Not showing their reward program on the web – Chase and Capital One are the most guilty parties here. The only reason I got the Chase Flexible Rewards is to actually find out about their reward program. It turns out to be quite good actually. But why can’t they simply display their rewards on the web just like american express and citibank? It will make comparing programs more easy (hmm! perhaps that’s why they’d rather not have us see it?)
8. Not showing Consumers the Effective Interest Rate – The APR is not the real effective interest rate you are paying on your balances. The real interest rate depends on whether you are using a monthly periodic rate or daily periodic rate. Most cards these days use the daily periodic rate while a couple of credit cards still use the monthly periodic rate. To find out how this affects the real interest rate, see our article on how to calculate the effective interest rate.
9. Increasing Your APR for no good reason – I’m not talking about the universal default clause, which credit card companies have abandoned since the Senate Banking and Finance Committee started poking their noses into credit card practices. But I know friends who got their APR bumped up for no apparant reason.
10. Charging Monthly Maintenance Fees – Subprime credit cards like to charge a “monthly maintenance fee” on top of exorbitant annual fees. Alright, when you have bad credit, you cannot be fussy. But charging an annual fee north of one hundred dollars, charging more monthly maintenance fees and an APR approaching 20% seems like daylight robbery. This is one good reason why you want to make sure you have great credit!
