Master the Fine Print of a Credit Card Contract

By Dawn Handschuh, Personal Finance Writer   

Have you ever spent time with a child who was learning to talk? Those first attempts at language are usually pretty garbled — much like the fine print on credit card applications.

It's less fun than a dirty diaper, but read the fine print on credit applications. If nothing else drives this home, consider the many homeowners now facing foreclosure, some of whom could have saved themselves if they had read the fine print in predatory loans.

Many sub-prime lenders are looking elsewhere, like credit card fees, to recoup their losses. Credit card issuers can be awfully creative in creating or raising fees.

The fine print, even on "no annual fee" credit cards, may contain hidden charges that cumulatively cost more than an annual fee.

While card issuers are legally obligated to inform customers of interest-rate changes, these disclosures are often buried in small type.

Look out for these credit card rip-off fees and loopholes

• Late-payment charges. You might know what day your payment's due each month, but do you know what time it's due? That's right — card issuers impose a deadline down to the minute. If your payment is due at 2 p.m. but it arrives in the mail at 2:01 p.m., it's late.
• Interest-rate hikes. Your card issuer may reserve the right to raise your rate if you make a late payment to other creditors, not just them. (This is known as a "universal default" clause.) Issuers are also notorious for raising rates after your credit score drops. Or they'll reduce the grace period during which customers don't pay interest. These practices have attracted the scrutiny of the U.S. Congress.
• Undone rates. Even if you're promised a "fixed" rate, the fine print may say the issuer can change rates any time, provided they give notice.
• Balance-transfer fees. Moving a large balance from a high-interest card to a lower-interest card seems sensible, but be careful. The lower-interest card can charge you a 2-4% transfer fee, and the rate may expire faster than your kid can say "Mama."
• Non-usage credit card fees. Some cards charge you for not using your card. To avoid inactivity charges, use your card at least once a quarter.