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Thursday, February 17, 2005 7:33 AM
Credit Caution: Part One 2/16/05
(CBS 6) — Americans sure love their credit cards — and credit card companies make it easy for us to use them! But our I-Team discovered if you're not careful — you could be paying way more for those purchases than you ever dreamed: Sound of credit card These days credit card companies are making it easier than ever for you to spend money. But along with the pre approved, low interest rate card, there is a catch. Tom Farvour/Credit Card User: "They told me it was too late, you didn't respond to the letter and by not responding you defaulted to 29.9 percent." That letter from a credit card company was Tom's first, last and only warning before his interest payment rose from 50 dollars to 240 dollars a month! Had he read it, he would have rejected the rate hike in writing and closed his account. Instead, he mistook it for junk mail. Tom Farvour/Credit Card User: "They are ripping people off. They are taking advantage of them and ripping people off." The catch is there in the card member's agreement, which many people simply don't read. Travis Plunkett/Consumer Federation of America: "It is written in the fine print. The credit card companies give themselves the right to do this and Congress hasn't stopped them." Some members of Congress are outraged by these tactics and have proposed legislation to stop them. The problem is that the credit card industry is a powerful lobby second only, some say, to the drug industry. The American Bankers Association acknowledges that a provision in the card agreement...known as 'universal default' allows them to raise your interest rate based on bad credit on other accounts unrelated to your credit card. James Chessen/American Bankers Association: "If you have mishandled your finances in other ways, that's going to reflected on your credit score and that well may be a reason why an interest rate may go up on a credit card." But Tom Farvour insists that his credit is clean. Tom Farvour/Credit Card User: "I have access to Trans Union credit reports..and on these reports there is no negative or derogatory information that would justify that." After a balance transfer, not even six months later, the same company was back — offering Tom a zero percent finance charge — based on his outstanding credit! So, how can you avoid this "universal default?" Get in the habit of paying all your bills early — at least a week or more before the pay due date. Consider using online banking to make sure your payment get there on time. If you're cutting it too close, pay over the phone or have one taken out of your checking account. Anything...to avoid a late payment!
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Credit Caution: Part Two 2/23/05
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