Credit Cards » Credit Card Guides » 11 Dirty Credit Card Companies Tricks To Beware
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11 Dirty Credit Card Companies Tricks To Beware

Credit card has a lot of beneifts - if you know how to use it the right way. The problem is a mix of things, like fees that are overwhelming, changes to the terms of the contract and a whole lot of underhanded dealings that credit card companies use to get your money. What are the most common tricks and how can we avoid them?
Author: Lorraine Smithills
Lorraine Smithills

Writer, Contributor

Experience

Lorraine is a freelance finance writer with years of experience in the banking sector and after a successful career in one of the largest retail and commercial financial services providers. She has a passion for helping people with less financial confidence to get control of their money through budgeting, saving, and responsible credit practices.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Lorraine Smithills
Lorraine Smithills

Writer, Contributor

Experience

Lorraine is a freelance finance writer with years of experience in the banking sector and after a successful career in one of the largest retail and commercial financial services providers. She has a passion for helping people with less financial confidence to get control of their money through budgeting, saving, and responsible credit practices.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Table Of Content

A report by Consumer Financial Protection Bureau revealed issues with purchase information shown in the credit card statement was the highest complaint at 27%. Though not in a specific category, other features, terms, or problems followed at 13%. This is less by half compared to the leading complaint. However, Americans struggled the least with paying their bills, which stood at 2%.

 

Any consumer wants to get the best deal they possibly can and any business wants to make some type of profit, but in most interactions, the business and the consumer react in a relatively fair manner.

When it comes to a credit card company and a credit user, however, that’s not usually the case.

When it comes to credit card companies, sometimes you can get the feeling that they tend to pull you in and then do whatever they can to get a whole lot of money out of you, without giving much of anything in return. But is it right?

Key Takeaways

  • Credit card companies are businesses. Part of the money they make comes from irresponsible use of customers.

  • Be financially disciplined, avoid impulse spending and understand how credit card work. If you don't understand – Google it or ask your company.

  • There are no free meals. If something looks too good to be true – be suspicious and use your common sense.

Are Credit Cards Good or Bad?

Credit cards are neither good nor bad, but ultimately depend on the user. If the cardholder does not have the discipline to curtail spending, then credit cards could be said to be bad for such a person.  This could lead to racking up more debt.

However, credit cards could come in handy during emergencies and provide relief. The key thing is having the will to be financially disciplined and avoid impulse spending.

Let’s take a look at some of the tricks that credit card companies are using the most.

1. Cash Advance Fees

Cash advances can cost consumers hundreds of dollars simply because they don’t read the fine print, yet credit card companies continue with this.

The problem is that credit card companies typically charge not just the fee, as much as 5% or $10, whichever is the higher amount, but also very large interest rates.

Those interest rates usually provide no grace period (unlike traditional credit card charges), which racks up charges quickly. As a result, many people take out cash advances without realizing it because they never read the fine print.

That fine print, however, says that if you make certain purchases with your credit card, it’s treated immediately as a cash advance; things like gambling and bail bonds or even money orders are treated this way often.

For those who need to take out cash advances or do so intentionally, it’s important to look at different cards and see what the cash advance terms are to get the best possible deal.

Card
Cash Advance Fee
Cash Advance Interest Rate
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$10 or 5%, whichever is greater.
24.99%

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Chase Sapphire Preferred® Card
$10 or 5%, whichever is greater.
25.74% Variable

Citi-costco-anywhere-visa-credit-card review

Costco Anywhere Visa® Card by Citi
$10 or 5%, whichever is greater.
28.99% Variable

AMEX Blue Cash Preferred Card review

Blue Cash Preferred® Card from American Express
$10 or 5%, whichever is greater.
28.99% Variable
Amex-Blue-Cash-everyday
Blue Cash Everyday® Card from American Express
$10 or 5%, whichever is greater.
28.99% Variable

capital-one-venture

Capital One Venture Rewards Credit Card
$10 or 3%, whichever is greater.
24.90% Variable

Discover it® Cash Back
$10 or 5%, whichever is greater.
27.99% variable

OpenSky® Secured Visa® Credit Card

OpenSky® Secured Visa® Credit Card
$6 or 5%, whichever is greater.
20.39% Variable

Wells Fargo ReflectSM Card (1)

Wells Fargo Reflect® Card
$10 or 5%, whichever is greater.
29.74% Variable

2. Sign-On Bonuses, With Too Many Conditions

Many people love the sign-on bonuses that are offered by credit cards. People can often get a hundred dollars or more or thousands of airline miles only for signing up. The problem, however, is that there’s always something hidden.

One of the most common ways that credit card companies offer these types of bonuses is by requiring a specific amount of money to be spent on the card within a particular amount of time.

Sometimes it’s $500 in a month, or even more. Of course, it’s not always exactly like this, but generally, it can be tough to achieve the requirements. Another way that credit card companies get business is by offering a higher percentage back, but it’s usually only available from specific retailers or institutions rather than for just anything.

That means you don’t get much back, especially if there are limits to the time period or the amount that can be earned, even if you hit the right categories. On the other hand, rewards cards can seem significant because you get something back for your purchases.

Unfortunately, to get those rewards, you have to spend even more money. As a result, people tend to spend too much to get the rewards they want, creating an endless circle. If you’re interested in rewards cards, consider the different options first.

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3. Credit Limit Reductions Without Notice

Anyone who signs up for a credit card is given a specific credit limit. Unfortunately, you’re not required to be notified if your credit limit is lowered and credit companies are allowed to lower them whenever they want according to the fine print.

What’s really bad is that your credit limit can be lowered enough to actually put you over the limit and when that happens you get charged fees immediately.

For people who can’t afford the amount that it costs to get back under the limit, it turns into a huge problem where the debt continues to pile on. Keeping your cards down as much as possible is the only way to avoid this.

Why Credit Card Companies Lower Your Limit?

This usually happens when the card issuer believes the cardholder has a high risk of default. Credit limits can also be lowered during periods of economic crises wand uncertainty, when there is cash crunch which increases the probability of default.

For example, during the pandemic, issuers reduced their credit limits to card holders. According to data from Bloomberg, 14 major card issuers collectively reduced cardholders’ limits by $99 billion in 2020.

This chart created with Experian data, highlights the significant increase in the average credit card limits in the last decade. Credit card limits have consistently increased with an overall increase in the recent 10 years.

 

4. "Attractive" Offers

Who doesn’t feel special when that credit card application comes in the mail?

After all, they stamp all things outside to make them look unique, ‘confidential,’ and ‘important.’ Then you open up that special envelope and find out you’ve already been pre-approved! What could be better?

But being preapproved doesn’t mean you already have the card (that one in the envelope is fake, after all). Instead, itu still need to apply for the card and get fully approved, as if they’d never preapproved you.

Just because a credit card looks like it has a great thing just for you doesn’t mean that it’s anything special.

5. One Payment Late, Two Big Fees

Have you ever looked at the fine print on your credit card to see what they actually charge you when you’re late on a payment? It could be as much as $50.

And then you could end up with a penalty rate just because you were late. That rate may kick in at 60 days late. What happens here is that you’re not just paying a fee, you’re paying a completely new interest rate, instead of the one you used to have.

And that penalty interest rate could be as much as 24.99%. That’s definitely not something you want. So, how do you make sure that you’re not going to get stuck with that penalty rate? You need to watch carefully.

You need to make sure that you know when your bill shows up and you definitely need to pay for it as quickly as you can, even at the beginning of the month. Or at least make sure you have a way to remind yourself before the due date.

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6. Extra Fees

When you first signed up for that new card you probably looked at the rules and at least scanned over the fees, but the way the system is designed, it forces you to initiate a number of different fees and penalties for breaking a single rule.

Did you know that credit cards are even charging you now for canceling your card?

The fee is still recent, but because people were recognizing all those excess fees and deciding to cancel their cards as quickly as possible the credit card companies and banks decided to make money on that as well.

Another fee you may find yourself stuck with is an inactivity fee. This fee charges you if you stop using your credit card for a particular amount of time. But even if you don’t have this type of fee, you’re going to want to keep track of this rule as well, and we’ll tell you why a little bit later.

7. 0%*  - Only If You Follow the Rules

This one always sounds great because you get to pay absolutely no interest. But the way it really works is the company keeps careful track of everything you would owe if they charged interest from day one.

Then, if you don’t pay off every bit of the charge by the very last day of the deal you get charged interest from day one, on the total purchase price, not what’s left.

Even worse, the interest charges are added to your balance, so you pay interest on interest!

woman hold 0% APR credit card
0% intro APR is a great way to pay off balance, just pay attention to the small details (Photo by PUWADON SANG/Shutterstock)

8. Special Upgraded Cards

Who doesn’t like the idea of being able to say that they have a ‘gold card’ or a ‘platinum card?’

It sounds prestigious for a reason, and credit card companies have continued to add new types of special sounding cards to their list. In the past these cards meant something and for some credit card companies maybe they still do, giving you different limits and rules, but nowadays they usually mean absolutely nothing.

What you should be looking at isn’t the name of the card. It should be things like interest rate, fees, and rewards. Take a look at our credit card page to find out about our top picks.

9. When is Your Payment Due?

Do you know when your card is due every month? Chances are you think you do, but the credit card companies can actually change your due date whenever they want, and that can screw up your entire plan.

That’s how you can get a late fee, even if your card used to be due on a specific day, if you’re only a few hours from the cutoff or if your due date is a weekend with no mail delivery.

No matter the reason, the company charges you a fee.

10. Initiating a Balance Transfer

Is your credit card company one of them that sends out checks in the mail? That nice blank check with a special offer, like free interest for a set amount of time, seems great, but there are some things to watch for.

A lot of people think that these cards are a great way to pay off some of their other balances.

But you may find that there’s a large fee, up to 5%, associated with actually using the check. Another negative is that you could miss out on something that would be bigger and better savings with a different credit card.

You could even end up with fees that are up to 3% of your total transfer amount, to make up for the 0% interest they charge.

11. Raise Your Interest Rate

Did you know that your credit card company can raise your interest rate whenever they want? They continue to look at your credit report so they can make a decision on what to charge you, and then they can update your interest.

Even if you’ve been late on a different card any credit card company can raise your interest rate. It doesn’t take much for a credit card company to start making changes to your account, and it’s all perfectly legal. 

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FAQs

Owing on your credit card does not automatically send you to jail, but could be the start of a domino effect ending in a lawsuit. If you fall behind in your payments for 6 consecutive months, your creditor will charge off your debt and file a lawsuit against you.

Once you receive the summons notifying you of the lawsuit, you are required to respond within 20 to 30 days, depending on the guidelines of your resident state where you live. Only 15% of collection cases are sued for non-payment by credit card companies.

Your credit card company can close your account without notice. However, you would have seen the signs coming. Credit card companies have a broad discretion to close your account due to a couple of reasons. 

For example, if the company is worried about your ability to pay your existing debt, it may decide to close your account. Other reasons include inactivity, overspending, adding too many users, or a drop in credit score.

Credit card companies can put a lien against your house if the debt is unsecured. However, it is not a straightforward process. To be able to come for your house, the credit card company first has to obtain a court judgment to place a lien on the property.

The judgment regarding liens varies from state to state, as some have a maximum amount of lien that can be placed on a house. Even when a judgment is obtained, the issuer can only get their money if there’s equity left above the homestead exemption, and the mortgage plus other liens are paid off.

Thanks to algorithms, it is very easy for credit cards to track your spending. Credit cards need information about cardholders to tailor products that would suit their tastes and preferences. Also, the growth of the data-selling ecosystem has led to the rise in demand for data by advertisers and marketers.

Companies that are nexus of large datasets such as credit card companies are usually enticed by offers from marketers and advertisers seeking to know how consumers spend their money. This has led issuers to use more sophisticated ways to track consumer spending.

Picture of Lorraine Smithills

Lorraine Smithills

Lorraine is a freelance finance writer with years of experience in the banking sector and after a successful career in one of the largest retail and commercial financial services providers. She has a passion for helping people with less financial confidence to get control of their money through budgeting, saving, and responsible credit practices.
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