As you may know, I’ve been running a series this week, looking at several deceptive practices credit card companies have begun to use in the past few years. As credit issuers have been making less money on the spread between their borrowed cash and the interest they charge their customers, the companies look for new ways to make money.
So far, we’ve seen the relatively new phenomena of two-cycle billing, universal default, and over-limit fees. They’re deceptive because the general public doesn’t know much about these tactics and the companies don’t advertise them well (nor would they want to). It’s up to the customer to be educated. In addition to the above three methods of sucking funds, some credit cards now have “due times” in addition to their “due dates.”
What are due times?
Many, if not most, issuers now consider a bill late if it arrives on the due date after a certain time of day—typically before the mail is delivered. Then you can get busted for being late, a situation that can jack up your rate to levels over 20% and add another $30 or more in fees.
This has a very simple solution. Assume that your actual due date is before the due date that is printed on your statement. Send your payment significantly early if you still use snail mail. If you live in the 21st century, schedule your electronic payment at least two days before the due date. This will give you enough time to correct a problem if they payment does not go through.
Credit cards can be great tools if you use them wisely and strategically. Limited-time 0% APR on purchases, 0% APR and no fees on balance transfers, and cash back rewards are all positive uses of credit. But the user has to be responsible. The credit cards offer these benefits because they know that most people will screw up; for example, by missing or delaying one payment on a limited-time 0% APR, the company will immediately bring your back interest due.
Use credit cards and don’t let them use you. Understand everything there is to know and read all your notices. If you do not, the issuers will take advantage of you.
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5:41 pm (reply)
Something else for the snail mail folks to watch out for: shorter grace periods. I always go over my Bank of America credit card bill with a fine-toothed comb as soon as I receive it, and one month last fall the first thing I noticed as I slid the bill out of its envelope was that my due date, which for years had been on the 28th of each month, was now the 23rd, where it has stayed ever since.
So if you get paid on the 15th and the 31st of every month like I do, dropping that check in the mail as soon as your direct deposit paycheck hits on the 15th is an increasingly good idea.
(And no, I’m not interested in BoA’s online banking.)
5:48 pm (reply)
Another thing… I’m quite sure BoA’s choice of 23 was no accident. With small enough print (like on, say, BoA’s credit card statements), 28 and 23 are easily confused if you aren’t paying close enough attention or have less than 20/20 vision. Why not 24? Or 22? No, going from 28 to 23 was intentional, and designed to funnel more late fees into their coffers.
“Don’t be such a conspiracy theorist,” you say?
“Don’t be so naive,” I say. =)
10:15 am (reply)
I have also noticed my bill moving up a day every month and then sliding back four days every four months or so. I have actually got my payments so I make one soon as it’s available online to view and another later in the month.
12:41 am (reply)
9:39 pm (reply)