Think you’ve got a good deal with your credit card company? Maybe you do – or maybe you did – but unless you regularly read those notices the company mails out every now and then or understand the legalese on the back of your monthly statement you probably don’t have a clue what your credit card company is up to. And for most people, the truth is a real downer. So, what do you need to know to discover the facts about your credit cards?
First, you need to know that if trying to understanding the terms of your credit card leaves you more overwhelmed than figuring out how you’re going to pay the bill – you’re not alone. Lenders are required by law to disclose certain legal information but no one says they have to do it in a way that we can all understand. And that’s where you can get into big trouble. Whether you’re shopping around for a new card or have been using the same credit cards for years, now’s the time to pull out your magnifying glass and start reading the fine print.
Start with trying to determine what your current contract with your credit card company is. You may have signed on for a low or fixed rate with lots of perks, but what many people don’t realize is that credit card companies only have to give you fifteen days written notice before changing your deal. You can choose to reject those changes by notifying the credit card company in writing and stop using the card, but of course you’d have to have seen and read the notices they sent in order to do that. In reality, most people don’t have a clue about what changes the credit card company is making to their contract and they just keep on paying!
You also need to realize that just about every term of your contract can be modified. That means your credit card company can raise your rates, slash rewards or charge you cash advance fees. Notices of these types of changes are sent in your monthly statement. At the beginning of each year, many credit card companies also send out amended agreements. When looking through the documents make sure you keep in mind the word “agreement” also means “contract.” For example, your credit card company can just come out and inform you that the rate you agreed to no longer is going to be the rate you will be charged. Or, it can happen in a number of less obvious ways. This past January one major credit card company notified its card holders that each time they pay their bill late, their interest rate will increase 5 percentage points – up to a maximum interest rate 28.99%! If this happens to you, even if you get back on track and pay on time, your credit card company may be under no contractual obligation to put the rate back down – in fact many companies won’t even consider it until you have paid on-time for nine consecutive months. Credit card companies can also decide to charge you an additional flat fee every time you pay even a day late (above the interest you’re paying)!
You also want to keep a close eye on the terms of those cash advances. These can carry a triple whammy and you need to make sure you know what your current contract says before pulling cash out or writing one of those checks they send you! Usually you have to pay a 3% fee and then get hit with a higher interest rate. To top it all off, the credit card company may not allow you to pay off your higher-rate balance until you’ve paid off the lower-rate balance you’re carrying!
What if you think your credit card company has treated you unfairly or acted in bad faith? Can they sue them? Not if there is an arbitration clause that precludes you from doing so! According to a Consumer Action survey, nearly half the banks that issue credit cards require you to give up your right to your day in court. Instead of being able to file a lawsuit, you have to go through arbitration to settle your dispute. That means that you don’t go before a judge or a jury, but rather your complaint is heard outside a courtroom by an independent arbitrator or panel. And if you don’t like the outcome of the arbitration, you are stuck. You can’t appeal the decision and you can’t go to court. What’s more, you usually have to pay for the “privilege” of arbitrating and that can cost hundreds and hundres of dollars.
So what can you do to protect yourself? Shop around. Research the credit card company you are thinking of doing business with. Don’t be afraid to ask questions and if you don’t like the answers ask more questions. Most importantly, recognize that you have a contract with your credit card company and they can change the terms of that contract just by giving you notice. If you keep doing business with them, you’ve accepted the new terms. But remember, if you don’t like the terms they are offering, you can always take your credit card business elsewhere!