EXTRA CREDIT

I do a lot of work for credit card companies and think you should be aware of some of the ways they are raping your wallet. Oh, yes they are.

Let me start you off with a little statistic. Okay – a big statistic. The credit card industry collected $43 billion in just fees last year alone. Yes, 43 BILLION dollars in one year in fees. Fees, people. Fees. Check your statement EVERY time because there are plenty of ways they’ll get you. Let’s examine a common one that a lot of people don’t think about: the balance transfer fee.

It must seem like every day that you’ll get an offer in the mail for a new credit card offering you an incredible rate on transferred balances. Sometimes they’ll offer you 0% for up to a whole year…or more! Of course, there’s typically a fee for this “service” hidden in the small print – and a lot of people are too lazy to do the math. Follow the footnotes to the bottom of the page, or to the reverse side for all the details. Do the math and you’ll likely discover that the savings you’d enjoy by transferring balances will be offset by the costs incurred in balance transfer fees.

So why do you keep getting these offers if they’re not that great? Because people keep responding to them. A smart shopper will wait for an offer that boasts of NO BALANCE TRANSFER FEES. Only then is it safe to move a balance from a higher rate card to a promotional 0% APR, provided the go-to rate is competitive.

What else? Well, chances are you’ve missed a payment date or two in your life. We all do it – set the bill on the counter…it gets buried by other bills, paper plates, newspapers, wads of cash we haven’t burned yet, etc. By the time you find the fucking thing, it’s due yesterday. So you write a check and hastily wish it off in the mail.

Big mistake. Better you call customer service and have them deduct a payment electronically. It can cost you up to $12 to have it done this way, but it’s better than the $29-$39 late fee you’re going to get hit with for missing the due date. Not only THAT, but a single missed payment date can trigger an interest rate hike. Suddenly, that innocent slip of the mind means you’ll be paying more in interest for as long as you carry a balance – a not-so-insignificant period of time also known as “forever.”


Speaking of missing payments and rate hikes, check out this popular credit card scam. It’s called the Universal Default Penalty. What it does is enable credit card companies to scour your credit report for missed payments of ANY KIND. Yes, my friend – if you’ve missed ANY payments, your credit card issuer has the authority to hike your interest rate – even if you have a perfect repayment history with them! The justification for this is that a missed payment of any kind means you are more of a credit risk. And here’s the part that’s shadier than Robert Novak. They’ll do it without warning, without notification, and without explanation. You’ll just open your bill one day, as I did last month, to discover your APR on purchases is now 14.9%. I know because this happened to me just last month. Here's a recap of the ensuing drama...

After uttering the phrase “What the Fuck?” several times with increasing disbelief and volume, I phoned MBNA America to inform them of my desire to “cancel my account right now.” I was transferred to a customer retention specialist who attempted to butter me up by using my first name several times in conversation. It did more to piss me off than anything else.

“Hello, Terry…how are you today? Terry, I see here that you’d like to leave us. We sure don’t like to hear that. Can I ask you, Terry, why you’d like to cancel your card?”

I wanted to throw a holy fit, but decided to keep it cool – after all, there was a possibility the call was being monitored for quality assurance purposes.

“Well you obviously already have my name, so I’m guessing you can see my APR, too, which I’m sure you’d agree isn’t even remotely competitive,” I remarked.

“Oh, let’s see here. Yes – I see you’ve got a 14.9% on purchases…”

“I do now.”

“What was that?” he asked quickly.

“I said I do NOW. I HAD a much lower rate, but today it’s 14.9% for some reason. I don’t know exactly why it’s 14.9%, but I do know that I don’t want this card any more for that reason. Please cancel my card now – I’m in a hurry.”

“Sure, Terry. But can I ask you quickly…what if I could lower your rate for you?”

“You’d have to lower it quite a bit,” I shot back knowingly. Threaten to cancel your card and they always lower your rate. That’s because credit card companies know it’s cheaper to keep an existing customer than it is to acquire a new one.

“Well, I could give you 0% for a year, then knock 3 points off the go-to rate?” he asked confidently.

“Interesting,” I noted…pretending to ponder his proposal. “So if I QUALIFY for a 0% APR for a full year, and an 11.9% go-to rate after that, why is my rate 14.9%? Help me understand because I’ve been a cardholder for 4 years and have never missed a payment.”

“Well, they have these computer models that calculate everything. All I know is I can get you 0% for a year today if you stay with us.”

Naturally, I accepted the offer. It’s hard to argue with the big zero. (Alan Colmes has been trying, with little success, for years.)


One more tip in shopping for a credit card that’s right for you – a fixed rate is usually better than a variable rate. Rarely will a credit card company LOWER your APR – but they’ll be more than happy to RAISE it if the Prime Rate goes up. The prime rate is the cost of money to banks. Variable rates are tethered to the Prime Rate. So if the Prime Rate goes up, so will your variable APR. A fixed rate is not tethered to the Prime Rate. So if you’ve got a 9.99% FIXED APR on balance transfers for life, you don’t have to worry about your company jacking the rate up to 13.99% when the Prime Rate jumps.

Finally, if you haven’t done so in awhile, I recommend calling up all of your credit card companies to cancel your cards. Tell them your APR is too high and you no longer want it. Don’t worry – they won’t actually cancel your card. They’ll offer you all sorts of incentive to remain a customer – lower rates for which you are already qualified, for will never receive unless you threaten to leave.

This is way more than you wantedto read about credit cards, so I'm going to stop.