Posted by: sulab March 20, 2009
Do you have credit cards? If yes then you must see this thread.
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6. "Paid in full? Not necessarily."

Banks
generally calculate interest charges in one of two ways: based on
average daily balance or on something called two-cycle billing. The
latter, which more card issuers are now adopting, penalizes customers
who carry a balance, even if it's only on occasion.

Here's how it
works: Say you start your month with a zero balance and charge an
amount that you don't pay off in full at the end of the month. If your
card uses the average daily balance method to calculate interest, you
are charged nothing for the month you made the purchase and interest
only for subsequent months in which payment is outstanding. With
two-cycle billing, interest charges begin with the day you make the
purchase.

Banks defend two-cycle billing as correcting the true
interest charges for credit card purchases. Ron Brooks, a spokesman for
National City, says it's a way to make sure card users pay interest
should they suddenly go from being "transactors" (those who pay off
every month) to "revolvers" (those who carry a balance).

One way
to avoid the issue is to stay away from cards that use two-cycle
billing to calculate interest charges and stick with those that go by
average daily balance. Unfortunately, it's not a permanent solution:
Your card provider can switch to two-cycle billing with just 15 days'
notice, so you'll have to keep checking.

7. "We're accepted globally, but our exchange rates are from Planet Rip-off."

In
recent years, plastic has all but replaced traveler's checks as the
preferred method for making purchases abroad. Credit cards are widely
accepted overseas, and they can be used in ATMs all over the world to
dispense cash in the currency of whatever country you're visiting. But
beware of hidden charges. Some banks have recently raised the rates on
currency conversion from 1% to 3%. On top of that, ATM usage has its
own fees attached.

Consumers Union recommends studying your
cards' policies on foreign currency purchases before you leave home,
then adjusting your spending accordingly. Cards issued by smaller
banks, for example, may have lower fees, as do certain brand-name
cards. American Express, which has long positioned itself as a card for
travelers, charges a flat 2%.

8. "We close early on payment-due dates."

Card
statements are crystal clear about what day your payment is due, but
they're not so forthcoming about what time on that due date. Some banks
have triggered consumer complaints by setting a 9 a.m. deadline on the
posted payment date -- essentially, before the mail arrives.

Chi
Chi Wu, an attorney with the National Consumer Law Center, says a
number of class-action lawsuits have succeeded in getting most banks to
push back their payment deadline to 2 p.m., the traditional banker's
closing hour, a time by which most mail delivery is complete. Even so,
a spokeswoman for the American Bankers Association is unsympathetic,
saying bills are due upon receipt and that banks spend a lot of money
giving consumers options such as paying by phone, paying online and
automatic bill pay. "I just don't understand why late payment is still
an issue for people," she says. "Pay your bill on time. It's easy."

She
has a point: If you can't allow plenty of time for U.S. mail delivery,
you can always take advantage of an online or pay-by-phone option. And
if you're really in a pinch, another alternative is to send your
payment overnight, which is worth it if it means avoiding a $30 late
penalty. But if you go that route, check the promised time of delivery;
the standard end-of-business arrival might not do the trick.

9. "Our whims are legally binding."

You
may think you've signed up for a credit card with terrific incentives,
a low interest rate and just the right mix of perks and fees to suit
you. But don't get too comfortable. Your card issuer can alter the
terms of your once-perfect agreement at any time, as long as it
provides you with advance written notice -- of as little as 15 days.

Consumer
groups report that this practice is a particular pet peeve with
cardholders, and for obvious reasons. But the ABA spokeswoman takes a
stab at defending the practice: "A credit purchase is an unsecured
loan. It's the riskiest sort of lending we do, which is why it's
expensive. The banks have to protect themselves."

Because
credit card lending is a highly competitive marketplace, unhappy
customers are almost always able to seek alternatives, the spokeswoman
adds.

How can you protect yourself from being blindsided? In
short, be vigilant. "Pay attention to all the mail you get from your
credit card company," Wu urges, "even if it looks insignificant."

Video on MSN Money

Liz Pulliam Weston
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MSN Money's Liz Pulliam Weston suggests investors continue saving for retirement and pay off their credit cards in 2009.

10. "Go ahead and exceed your credit limit -- we like that."

Contrary
to popular belief, a purchase that puts you over your credit limit
won't necessarily be declined. But you might wish it had been, since it
could bump your interest rate into the stratosphere.

Lea Barker,
a data-entry clerk in Oakland, Calif., found that out the hard way when
she exceeded the limit on her Visa card -- and her interest rate
skyrocketed to 29.9%. The sudden increase was among the factors that
ultimately pushed her into credit counseling and a debt-management
plan.

"I have to find another $1,000 a month to dig my way out," Barker says. "I'm looking at a second job."

Adding
insult to injury, banks often levy a so-called overlimit fee against
maxed-out cardholders -- roughly a $30 penalty every month your balance
remains above the credit limit. The ABA spokeswoman says "consumers
would rather deal with the fee than the embarrassment of being
declined."

But consumer advocate Travis Plunkett of the
Consumer Federation of America is having none of it. Overlimit fees, he
contends, are simply another way for banks to make money at the expense
of the unwary.

"If (banks are) willing to accept charges (over
their cardholders' limits)," Plunkett says, "then they should accept
the profit that comes from the increased interest charges" and leave it
at that.

source:

http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/10-things-credit-card-issuers-dont-say.aspx

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