5 Credit Card Traps to Watch Out For

by Miranda Marquit · 9 comments

The Credit CARD ACT passed in 2009 has had some positive effects. Some of the measures protect consumers, and there are changes that can encourage consumers to pay off their credit card debt faster. Indeed, Consumer Reports says that there are indications that the requirement to include pay off date information on credit card statements is helping consumers see just how costly their credit card debt is — and they want to do something about it.

However, even with these positive changes, there are still ways to become ensnared in credit card traps. Credit card issuers are good at what they do, and determined to make money. They are businesses, after all. Here are 5 credit card traps you need to watch out for:

1. Business Credit Cards

It is important to realize that business cards are not protected by the CARD Act. The provisions of consumer protection in the CARD Act do not extend to “professional” cards. This is probably why I’ve seen a real increase in credit card offers in the name of my home business, rather than directly aimed at me. When you are choosing a credit card for your business, make sure you understand the terms, and that you are prepared for what’s coming. All of the practices that credit card issuers could engage in before the CARD Act are still legal with business cards.

2. 0% Balance Transfer

The 0% balance transfer is making a comeback, and for many this can be a good thing. However, it is important to watch out. These card offers are coming with higher transfer fees than before, and the “regular” rate at the expiration of the intro period is also higher than it has been in the past. Make sure you run the numbers to ensure that your savings outweigh the balance transfer fee, and that you will be able to pay off the card quickly.

3. Rewards Program Changes

Understand the rewards program, and any changes that might be taking place. In some cases, rewards caps have been instituted. Additionally, there are onerous rules regarding what happens when you are late with a payment, or when you miss a payment. Some credit cards are charging redemption fees when you use your rewards points. Make sure you read the fine print, and that you are aware of what could be happening with your credit card rewards.

4. Lower Credit Limit

This happened to me. One of my credit card issuers lowered my borrowing limit for no real reason. This can be especially dangerous if you haven’t really been paying attention to your new limit, as you could accidentally go over, triggering fees. Make sure you read everything your credit card issuer sends you, noting new credit limits, fees and other changes that are on the way.

5. Canceled Account

Finally, you have to be careful about what is going on with your account. You want to make sure that your account remains in good standing, and that it has regular activity. Otherwise, you might find it closed. Many credit card issuers are closing accounts for inactivity, and that can impact your credit score in some cases. It can also limit your access to credit when you need it. Make sure you stay on top of things, and that you make purchases that you can pay off quickly, in order to prevent an unexpected account closing.

This post was featured in the Carnival of Personal Finance.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

Related Posts

{ 9 comments… read them below or add one }

retirebyforty October 26, 2010 at 11:03 pm

Good tips. I only have one active card now so I’d better check on the back up card that I haven’t touch in a year.

Reply

Mark October 26, 2010 at 11:42 pm

Interesting. I actually didn’t know that business cards did not fall under the CARD Act legislation.

Reply

Steve Jobs October 27, 2010 at 11:33 am

These credit card companies really would like to get the most of their business from you. All they want is money getting in. I remember one time when I was still working with a big telecom company; I suddenly received a credit card in which I didn’t apply for. They told me, I was eligible for a credit card and so they thought they send me a readymade credit card. That is how desperate they are.

Reply

Blue Spyder November 2, 2010 at 12:32 pm

No credit cards for me, I’ll stick with my check card

Reply

expat July 14, 2011 at 11:28 am

Here’s a new trick!

I recently discovered that my Lowe’s credit card, owned by GE Capital, considers a credit card bill that’s paid early as a late fee, if it is not in the 3-week window leading up to the due date. Found this out after making a payment on the due date and another payment three days later (or 3 weeks early for the next due date), in order to avoid forgetting/missing the coming month. You could make ten early payments and if they were not in that 3 week window, you would still be charged a late fee. NICE!!!!

Reply

Jordan May 3, 2012 at 10:08 am

As a student who had no idea how to manage finances or how to look ahead to see the pitfalls of my actions, I racked up $4500 worth of credit card debt on a 0% interest card. This was fine, until I lost my card and missed a payment in the confusion surrounding the company issuing a new card. My interest immediately ballooned to 25%, and up to the maximum 29.99% a few months later.

At this point, I would KILL for a 0% balance transfer credit card, but because of my credit utilization, my credit score is below the threshold for acceptance by these companies.

Humorously enough, if I were able to pay off this credit card, my score would jump into a range that is typically accepted by these companies for balance transfer cards.

Reply

Doug June 22, 2012 at 2:03 pm

to expat: GE Money is one of the most preditory credit companies in the world, and unfortunately it furnishes most of the department store and retail businesses credit cards as well as some business sevices like copier and business equipment leasing.

They are fiendish. There’s a reason that GE didn’t pay any income taxes last year.

Reply

Romeo Ybanez July 25, 2012 at 7:02 am

I propose to make it illegal to record financial transactions for the purpose of curtailing citizens’ right to credit.

Reply

Rao December 5, 2012 at 3:06 pm

Normally, the amount you can get as a cash adanvce is 20% of your limit. So you are looking for a bank that will give you a $50,000 limit. No card company will give that high a limit to a new customer.

Reply

Leave a Comment