A few ways in which credit card companies still exploit customers

Credit card issuers are still exploiting the customers in many ways. Whatever little time is left for them to implement their "anytime, any reason", strategy, they are using it to alter interest rates. Rates as high as 30%, which were previously unheard of, have been the norm for some credit card issuers. It is not just the APR on the credit cards which are significantly increasing. The penalty rates on many of the credit cards are also rising. For example, it is not uncommon to find events like being late for payment by one day, leading to a hike in the interest rates. Unfortunately credit card customers, who saw their APR going up as a penalty before the new reforms were introduced, wouldn`t benefit from the new rules at all. The rate changes in those cases seem to be permanent.

Credit card issuers are reducing credit limits without giving any heads-up to the customers. Even credit lending standards have tightened, which means getting a new credit card is very difficult. The credit score requirements for prime customers have also increased. In fact, there has been a steep rise in fees for cash advances and balance transfers. As per a new study, although only 20% of the credit cards have an annual fee, it is likely to go up in the near future. 40% of banks have or will increase the annual fees in the future too.

Credit card issuers are also converting the APR to variable ones, when the index rate is very low and about to go up. There are additional floors to these variable rates, so that rates can only go up but never come down. Credit card issuers are also changing the whole fee structure and definition. For example, customers are being charged interchange fee even when the international transaction is in dollars. Rewards programs are being changed too; with cash back offers being reduced and thresholds to get free flights getting tougher. In fact, a lot of new types of fee have been added. Accounts are also being closed without any notice. This means you could be denied a purchase and then realise that your credit card has been cancelled. Most credit card companies are using high fees and fine print as their primary weapons.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.