Credit card companies are great at marketing their latest features, but before you or your clients sign on the dotted line, read the fine-print carefully and look for some of the following fine-print pitfalls:
Cash Advances - The convenience of getting cash is very expensive when it comes to some credit cards. Many credit cards not only charge an upfront fee of up to 4% of the advance, they also carry higher interest rates than other charges on the same card, and have no grace period whatsoever. But here's the sneaky part: many credit card companies will require that balances for regular purchases be paid off before you begin paying off the balance of the cash-advance, which is often hit with a much higher interest rate.
Killer Fees - When it comes to fees, no one is more innovative than credit card companies. Here are just a few: account set-up fee, program participation fee, account maintenance fee, authorized user fee, credit limit increase fee, Internet participation fee. But, the trickiest credit card fee for consumers who are looking to improve their credit scores is the annual fee. Forced to keep the account open to demonstrate a history of good payments to the credit bureaus, consumers end up paying annually for that privilege.
Universal Default Clause - The universal default clause is an egregious provision that allows credit card companies to tack on an exorbitant "penalty" interest rate if a consumer is late on any of his or her bills, including items like utility bills. According to the advocacy group, Consumer Action, most default interest rates hover around 30%, but it's not uncommon to see a penalty rate of up to 35%. Some analysts have even reported rates in excess of 40%!
Binding Arbitration - Some credit companies have a binding arbitration clause. By signing this agreement, you have waived your right to a jury trial if a dispute arises between you and the company. Your case must be settled by an arbitrator. And the arbitrator is often chosen and hired by the credit card company.
Changing Terms - The terms and conditions of credit cards can be easily amended by the lender with a simple written notification. This notice usually accompanies the monthly statement. Some reports suggest that many consumers simply end up trashing the important notification, along with the usual pile of unwanted marketing material also enclosed in the envelopes, without ever reading it. Don't this happen to you or to your clients.
If you think of any other credit card features I should add to my list, please give me a call.
For help or questions contact:
Senior Loan Consultant - NMLS #126036
GMH Mortgage Services, LLC
625 W. Ridge Pike, Building C, Suite 100 | Conshohocken, PA 19428 | Direct: 610-355-8039 | Cell: 610-739-6563