It is standard lobbying practice for any industry about to come under additional regulation from Congress to shout to the press, and whoever else will listen, that any and all proposed regulations or laws of any kind would adversely affect the poor customer. Thus, any additional rules or regulations of any kind on credit card companies would make things worse for credit card customers.

More reading: Citibank Thankyou Points catalog.

Grandstanding aside, while poorly thought out regulations can hamper entire industries and harm customers, many times new government oversight can have a positive affect both on the industry as a whole, and on the experience of customers as well. In the case of recent credit card legislation, the new rules and regulations on banks and credit card issuers were thoroughly debated not just between Republicans and Democrats, but within those parties as well.

Fortunately, the by-product of real debate is often good legislation. Unfortunately, the power of lobbyists can overwhelm good debate when the sides are fractured.

What emerged from Congress in the form of newer, tougher, credit card industry regulation was indeed thoroughly debated, but was it good for customers, or did it, as the industry claimed, hurt ordinary credit card holders?

The general answer to that question remains open. Clouding the issue is the overall tightness of the credit markets, compounded by the nearly overnight end to the traditional way of doing business in the banking and finance industry. If it is harder to get a credit card there is no way of knowing whether that is the result of over-reaching rules issued by Congress, or if it is just that so many financial institutions have shaky balance sheets cluttered with “toxic assets.”

One area that keeps being mentioned in the press that has negatively affected consumers is that credit card reward programs are becoming more stingy. However, little evidence is cited other than the occasional card holder who says that they are getting less value from their credit card mileage or credit card points than they used to. The catch is that many credit card rewards programs were being trimmed before the credit card laws were even passed!

I made note in this personal finance blog that Capital One NoHassle Rewards were less valuable than they were just one year before back in 2008 when I used 10,000 Capital One miles for each $100 gift certificate to major retailers. Nobody can blame credit card laws for that!

Let me know if you see a downward revision in your credit card rewards program. If you have an old rewards catalog, don’t throw it out. Instead, keep it to compare how your rewards change over time, and if a credit card company is screwing you, don’t be afraid to open a new reward credit card or even a cash back credit card and throw that old in the shredder.

New credit card laws passed by Congress in 2009 are going into effect.  What you need to know about credit card laws and how they have changed won’t be a big difference from what things were before.  Credit Card companies testified in front of Congress that they would stop using their very worst tricks.  That, plus a multi-million dollar lobbying campaign made sure that the new credit card laws did not require sweeping changes to the credit companies typically sneaky and underhanded business practices.

How do these new credit card laws affect smart credit card users who take advantage of good credit card rewards programs to earn points or miles?

One of the major rule changes states that when the credit card issuer decides to unilaterally change the terms of your contract, they have to give you 45-days advance notice.  If the new terms are not acceptable to you, you can opt out.

There is a catch.  In order to opt out, you must cancel your card, and close your account.  Then, you have to pay off the whole remaining balance within a certain number of days.  Oh, yeah, and that doesn’t apply to variable rate cards.

If you pay off your credit cards every month, then this is no big deal, because you could always pay off your card account and cancel it before you were charged any interest anyway.

If you carry a big balance on your credit card, then this doesn’t really help you anyway, unless you can figure out how to pay off that credit card account in 90 days.  If you could do that, you probably wouldn’t have the large balance in the first place.

Basically, the only people this really helps are people who have small to medium sized balances on their credit cards, and people who can take advantage of balance transfers to other credit accounts.  Of course, in that case, it was always possible to do that and then cancel the card anyway.

In other words, you have to be just as sharp and aware of credit card companies tricks.

Credit Card Rules Change Used to Hide Bad Company Behavior

As we’ve come to expect from banks and credit card companies, many credit card issuers are taking advantage of all the noise around the new credit card rules to make a few not-so-favorable changes to their credit card terms as well.

American Express recently notified some customers that their rates were going up.  The new rates are a variable rate equal to PRIME plus a certain percentage.  Some card holders report getting new terms of PRIME RATE plus 12% or so.  With the Fed holding rates at all time lows (nearly zero percent) that means that the interest rate on these American Express cards will be around 15%.

That doesn’t sound too bad.  Except for two things, first, now that these customers have variable rate cards instead of fixed rate cards, the helpful rules no longer apply because different rules apply to variable rate accounts than credit card accounts with fixed rates.

Second, watch out as the economy recovers and the Fed starts to raise interest rates back to more normal levels.  PRIME interest rates of 4% are just a 1% raise in the Federal Reserve target interest rate away.  Putting the Fed Funds rate back at a still very low 3% means a PRIME rate around 6% and the American Express card interest rate rises to 18% pretty quickly.

Be careful out there.  Remember always take advantage of reward credit card programs.  Use these various credit card rewards points to offset the expenses and inconveniences of always having to watch your back to make sure the credit card companies are sticking a knife in it.

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Citibank raised the interest rates for customers with high credit scores who had never missed a payment.  Virtually every credit card company opposed the very tame reforms recently passed into law by Congress.  The sad truth is that is isn’t a matter of if your credit card issuer will try something sneaky, it’s a matter of when, and how bad will it be.

While there is always tension between a company that must turn a profit and consumers who want to get as much as possible for the lowest price, with most relationships between a business and consumer there is at least some degree of fairness.  Unfortunately, this is seldom the case for the relationship between credit card company and credit card user.  Instead, in this relationship, the credit card company works hard to hook a customer and then slowly tries to squeeze the maximum profit out of them.  Between absurd fees, sudden contract term changes, and just plain old subterfuge, your credit card company is out to get you if you stop paying attention.

Top Credit Card Company Tricks – 0% APR Credit Card Offers

While there are many areas the banks that issue credit cards are less than forthright, one area that the tricks come fast and furious is with 0% credit card offers.  Whether it is a zero percent interest balance transfer offer, or an offer for 0% interest for an introductory period, you have to stay on your toes to stay ahead of all the little tricks credit card issuers play.

Here, are the most common credit card company tricks on 0% interest credit cards.

1. Transaction Fees – Buried in the middle of the text of a full-page letter or even on the back of the page in lighter gray text is the notification that this particular 0% offer is not a free offer.  Instead, you’ll be charged a transaction fee of 3% typically.  That means when you write a credit card check or fill out the balance transfer form, you’ll be charged 3% (or more sometimes) immediately.  No grace period, no chance to pay it off before there are interest charges.  If you take $5,000 with this 0% interest credit card offer, you’ll be charged $150 the second you get the money no matter how fast you pay it back.  In other words, you don’t have to pay off $5,000 before the offer expires, you have to pay off $5,150 before the offer expires. 
2. Payments Credited to Lowest Interest Balance – Here is the one that even financially savvy consumers miss.  Buried in the fine print of your zero percent interest balance transfer offer is the fact that every payment you make will be used to pay off the part of your balance that is being charged 0% interest.  Any other charges you make are going to get hit with full interest charges.  Oh, and by the way, those interest charges?  You’ll be charged interest on it too until you pay off the whole zero percent balance!  In other words, if you take $5,000 at 0% and then next month you charge $300 thinking that you will make a payment of $300 to cover it without being charged interest, you’ve fallen into the trap.  Instead, when you send in your $300 payment, the credit card company will reduce the amount you are paying 0% on by $300 and nothing will be credited to the $300 which you are going to be charged interest on.  So, after the first month you have $4,700 at 0% and $300 at the full rate.  After next month it will be $4,700 plus the $305 or whatever your interest rate makes it.  In other words, you cannot use your credit card in anyway until after you have paid off the free offer, whether that is 6 months, 12 months, or 24 months.
3. Minimum Payment Still Required – Some zero percent offers require you to still make the minimum monthly payment.  If you are late by just one day at any time, the whole 0% interest rate promotion can be revoked immediately and you start paying the full interest rate. Call and complain, and you might get this one reversed, but don’t count on it.
4. Zero Percent As Long As Balance Is Paid By End of Offer – This one is most common with department store credit cards.  The way it works is that the credit card company keeps track of how much interest you would owe if you didn’t get 0% interest rate.  Then, if you don’t finish paying off the whole zero percent balance by a certain time, then you have to pay ALL the interest, not just the interest going forward.  So, if you buy a $6,000 bedroom set with a 24 month same as cash offer and you haven’t paid off the full $6,000 then you will pay all of the interest for each and every one of those 24 months.  And how will you pay it?  It will be added to your balance so they can charge you interest on that too.

Using a zero percent interest rate credit card offer can make good financial sense, but you have to be careful to follow the rules exactly to avoid coming out worse than you thought.

Smart Rules for Using 0% Interest Offers

How do you keep from becoming another cash cow sucker for the credit card companies?  Follow these simple rules and you’ll be ahead of most of their tricks.

1. Watch Out For Transaction Fees – Use no transaction fee offers whenever possible.  These are less common from credit card accounts you already have, so you might have to look at offers for getting a new credit card.
2. Stop Using the Card – Take the card out of your wallet or purse and do the same for your spouse.  If any kids have a card on that account, get theirs too.  Put them in a safe or other place where they can’t be accidentally used until the whole zero percent balance has been paid off.
3. Setup an Automatic Payment – Many cards will allow you to setup an automatic payment.  This is a must if you have an offer that still requires an on-time monthly payment.  If you have a card that must be paid off by a certain date to avoid being charged all accrued interest, make your automatic payment enough to pay off the balance over the free time period. At minimum write down the date your account must be paid by in big colorful letters on every calendar you have.  Don’t cut it close, pay it off a month or more in advance to avoid any mishaps like lost checks or a family emergency that keeps you from remembering.
4. Don’t Zero Percent Hop – Some people try and get too cute and keep swapping one zero percent interest rate offer for another 0% offer.  While this sounds smart in theory, your odds increase of making a mistake that could cost you enough to wipe out any savings you’ve gotten up until then.  If you have no other options, then by all means, another zero percent offer is better than nothing, but focus on paying that one off right away.  Otherwise, if you want to take advantage of multiple 0% offers, close out the first one and then move on to the next one.  That way, you’ll make sure you are starting fresh each time.

Want to get benefits and make money back from using your credit cards?  Get the right rewards card and use it wisely.  Then, the benef
its you earn will out weigh the hoops you have to jump through.

Issuers of credit cards have started re-doing their terms and conditions in anticipation of recently passed legislation taking effect which prohibits some of the more egregious terms from credit card agreements.

Watch for non-descript black and white mailings that contain a small brochure with fine print.  These are likely the new terms and conditions for your existing credit cards.  Make sure you read them over and see what is changing.

There is nothing in the new credit card law that says your credit card company can’t change something else to make sure that you stay a cash piñata to the banks fee revenue streams, so don’t assume that everything else is staying the same.  We’ll keep our eyes out as the new terms and conditions roll out and let you know if we spot anything big or any sort of trends.