10 things credit card issuers don't say

By SmartMoney

1. "We're just waiting for you to screw up."

Many
things can bump your credit card interest rate into the red zone, but
nothing faster than what's called universal default. You can make all
your credit card payments religiously and for a long time, but fall
behind on your electric bill and, suddenly, you're a deadbeat -- and
will be charged accordingly. Rates can change on short notice, from low
and reasonable to up to 35%.

Card companies say what they're
doing is managing risk. Consumer groups disagree, because many people
in universal default aren't deadbeats by any reasonable definition.
Say, for example, you're disputing a charge on a medical bill or
waiting for an insurance snafu to be resolved. If a billing clerk kicks
it to collections, you're in universal default. Or suppose your credit
score drops -- a common event that may be entirely unrelated to your
bill-paying behavior. That's also likely to push your interest rate
higher.

The best way to avoid the problem is the most obvious: Pay your bills on time. Bankrate.com, a personal-finance Web site, further advises that if you have a disputed bill, resolve it before it reaches collection status.

2."When it comes to identity theft, we're part of the problem."

Identity
theft victim Tony Sciulli of Santa Barbara, Calif., says it started
with a forged credit application -- a $3,000 balance was mysteriously
transferred to a new card in his name, followed by a ready-made check
billed to one of his other cards. What can you do to avoid this sort of
low-tech thievery? Buy a shredder, and minimize the credit applications
coming to your house by registering at OptOutPrescreen.com.

But
paper solicitations are only the tip of the iceberg. As Internet
security expert and author Bruce Schneier warns, "Data about you is not
under your control." He points to examples such as a May 2005 case
involving Bank of America and Wachovia, in which a man posing as a
collection agent paid bank employees for customer data in New Jersey.
The banks notified customers their data may have been compromised and
offered to help watch their accounts for suspicious activity. (The man,
Orazio Lembo, pleaded guilty in March 2007 and was sentenced to five
years in prison and fined $20,000.)

But John Hall, a spokesman
for the American Bankers Association, insists that banks have
"Pentagon-level security." His advice: "Monitor your accounts. Protect
your passwords and your computer."

3. "Your children are our future."

It
wouldn't surprise most parents to know that their college-age kid can
get a credit card. After all, university students, however financially
dependent, are adults whose earning years are just beginning, making
them "good risks" for creditors. What parents might not know is the
fact that card issuers are now taking that reasoning a step further:
"The big trend is marketing to high school students," says Robert D.
Manning, the author of "Credit Card Nation" and a professor at the Rochester Institute of Technology.

Manning
says most parents don't realize how early a child's name, address and
other information can turn up in the databases used by credit card
companies to market their products -- or that kids as young as 16 can
get cards without parental permission.

"(Credit card issuers) know that if a kid gets in trouble, usually the parent will pay," he says.

What
can parents do? Protect your child's information, and assume that all
requests, however legitimate, will land it in a database somewhere.
Gift cards, for instance, may offer protection if lost or destroyed,
but they require personal data. Manning and other experts advise
teaching teens about credit well before they get their first cards and
monitoring their spending as they learn to use them.

4. "Our 'freebie' rewards are anything but."

In
the hypercompetitive credit card marketplace, rewards are a way for
banks to target big-spending niche audiences -- frequent fliers, for
instance. But these programs often come with catches, such as
exorbitant interest rates and high annual fees, so it's important to do
your homework. "(A rewards card) doesn't make financial sense for just
anyone," Manning says.

Before signing on, figure out how much
you'd have to spend to earn the incentives from a given card. If the
math works out to anything less than one penny earned per dollar spent
(or a mile per dollar, in the case of mileage cards), then you could do
better.

Also, be sure to look for the rewards that best suit your
needs. For example, if you want an abundance of options, from retail
goods and services to charitable donations, American Express' Membership Rewards cards
let you accumulate points at the rate of a penny per dollar spent --
and double that at gas stations and drugstores. Or if it's air miles
you're after, the United Mileage Plus Signature Visa is one card that stands out from the pack, with its one-mile-per-dollar ratio and host of travel benefits, including upgrades.

5. "Debit cards should come with a warning: 'Use at your own risk.'"

A
few summers ago, Vicki Jacobson's college-student son, Craig, was
coming home from a European vacation. Arriving at an airport, unable to
speak Italian and his available cash growing short, he attempted to pay
for his taxi ride with a debit card. The driver ran the card three
times and a credit card once, but it was unclear after each pass
whether the transaction had gone through. Finally, anxious about
catching his flight, Craig paid with his dwindling euros and left Italy
behind.

You can probably guess what happened: He was charged
for that taxi ride three times on the debit card and once on the credit
card. And that's when the fun really started: Months after the
incident, the credit card charge was nearly resolved, but they were
still unable to make any headway on the three erroneous debit charges.

"It can just be very difficult to penetrate the system," Vicki Jacobson says.

Why
so much trouble with the debit card transactions? Debit cards resemble
credit cards in all visible ways but have fewer protections for the
consumer. Some debit cards offer purchase protection -- meaning you can
replace a damaged item within 90 days -- but many do not.

And
although unauthorized transactions, such as the three charged to
Jacobson's son, are supposed to be refunded by the issuer, banks are
less motivated to speedily resolve cases involving debit cards than
credit cards. Why? Debit cards draw on a checking account, meaning
they're essentially checks in plastic form. Credit cards, by contrast,
constitute a loan -- meaning it's the bank's money, giving it more
reason to protect it.

6. "Paid in full? Not necessarily."

Banks
generally calculate interest charges in one of two ways: based on
average daily balance or on something called two-cycle billing. The
latter, which more card issuers are now adopting, penalizes customers
who carry a balance, even if it's only on occasion.

Here's how it
works: Say you start your month with a zero balance and charge an
amount that you don't pay off in full at the end of the month. If your
card uses the average daily balance method to calculate interest, you
are charged nothing for the month you made the purchase and interest
only for subsequent months in which payment is outstanding. With
two-cycle billing, interest charges begin with the day you make the
purchase.

Banks defend two-cycle billing as correcting the true
interest charges for credit card purchases. Ron Brooks, a spokesman for
National City, says it's a way to make sure card users pay interest
should they suddenly go from being "transactors" (those who pay off
every month) to "revolvers" (those who carry a balance).

One way
to avoid the issue is to stay away from cards that use two-cycle
billing to calculate interest charges and stick with those that go by
average daily balance. Unfortunately, it's not a permanent solution:
Your card provider can switch to two-cycle billing with just 15 days'
notice, so you'll have to keep checking.

7. "We're accepted globally, but our exchange rates are from Planet Rip-off."

In
recent years, plastic has all but replaced traveler's checks as the
preferred method for making purchases abroad. Credit cards are widely
accepted overseas, and they can be used in ATMs all over the world to
dispense cash in the currency of whatever country you're visiting. But
beware of hidden charges. Some banks have recently raised the rates on
currency conversion from 1% to 3%. On top of that, ATM usage has its
own fees attached.

Consumers Union recommends studying your
cards' policies on foreign currency purchases before you leave home,
then adjusting your spending accordingly. Cards issued by smaller
banks, for example, may have lower fees, as do certain brand-name
cards. American Express, which has long positioned itself as a card for
travelers, charges a flat 2%.

8. "We close early on payment-due dates."

Card
statements are crystal clear about what day your payment is due, but
they're not so forthcoming about what time on that due date. Some banks
have triggered consumer complaints by setting a 9 a.m. deadline on the
posted payment date -- essentially, before the mail arrives.

Chi
Chi Wu, an attorney with the National Consumer Law Center, says a
number of class-action lawsuits have succeeded in getting most banks to
push back their payment deadline to 2 p.m., the traditional banker's
closing hour, a time by which most mail delivery is complete. Even so,
a spokeswoman for the American Bankers Association is unsympathetic,
saying bills are due upon receipt and that banks spend a lot of money
giving consumers options such as paying by phone, paying online and
automatic bill pay. "I just don't understand why late payment is still
an issue for people," she says. "Pay your bill on time. It's easy."

She
has a point: If you can't allow plenty of time for U.S. mail delivery,
you can always take advantage of an online or pay-by-phone option. And
if you're really in a pinch, another alternative is to send your
payment overnight, which is worth it if it means avoiding a $30 late
penalty. But if you go that route, check the promised time of delivery;
the standard end-of-business arrival might not do the trick.

9. "Our whims are legally binding."

You
may think you've signed up for a credit card with terrific incentives,
a low interest rate and just the right mix of perks and fees to suit
you. But don't get too comfortable. Your card issuer can alter the
terms of your once-perfect agreement at any time, as long as it
provides you with advance written notice -- of as little as 15 days.

Consumer
groups report that this practice is a particular pet peeve with
cardholders, and for obvious reasons. But the ABA spokeswoman takes a
stab at defending the practice: "A credit purchase is an unsecured
loan. It's the riskiest sort of lending we do, which is why it's
expensive. The banks have to protect themselves."

Because
credit card lending is a highly competitive marketplace, unhappy
customers are almost always able to seek alternatives, the spokeswoman
adds.

How can you protect yourself from being blindsided? In
short, be vigilant. "Pay attention to all the mail you get from your
credit card company," Wu urges, "even if it looks insignificant."

10. "Go ahead and exceed your credit limit -- we like that."

Contrary
to popular belief, a purchase that puts you over your credit limit
won't necessarily be declined. But you might wish it had been, since it
could bump your interest rate into the stratosphere.

Lea Barker,
a data-entry clerk in Oakland, Calif., found that out the hard way when
she exceeded the limit on her Visa card -- and her interest rate
skyrocketed to 29.9%. The sudden increase was among the factors that
ultimately pushed her into credit counseling and a debt-management
plan.

"I have to find another $1,000 a month to dig my way out," Barker says. "I'm looking at a second job."

Adding
insult to injury, banks often levy a so-called overlimit fee against
maxed-out cardholders -- roughly a $30 penalty every month your balance
remains above the credit limit. The ABA spokeswoman says "consumers
would rather deal with the fee than the embarrassment of being
declined."

But consumer advocate Travis Plunkett of the
Consumer Federation of America is having none of it. Overlimit fees, he
contends, are simply another way for banks to make money at the expense
of the unwary.

"If (banks are) willing to accept charges (over
their cardholders' limits)," Plunkett says, "then they should accept
the profit that comes from the increased interest charges" and leave it
at that.

source:

http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/10-things-credit-card-issuers-dont-say.aspx

"sulab, open your wallet, get your credit card out and then slowly swipe right into your ass full of shit. Now open your mouth and lick your credit card". I am sure your credit card issuer said this before your impecunious broke ass applied for one.

JesusCrist: Did you do that when you got your first credit card and advisinng the same to others? Very unique experince, should have posted video.