Credit cards seems so straightforward on the surface, but a dizzying array of fine print details can make using yours more like Credit Cards and Consumer Rightsrunning through a land mine laden field of financial woes. As someone who pays the balance in full each month, avoids late fees, and never uses it for cash advances, I tend to avoid reading all the fine print on my bill. Yet, as Time Magazine points out in the March 3, 2008 issue article called “The Fine Print”:

To credit-card companies, it’s not sufficient that customers pay their bills on time every month; they must also avoid a daunting array of borrowing habits that lenders deem risky. Like borrowing. Katie Groves, 42, learned this firsthand when the annual interest rate on her Chase Visa bill jumped to 29.99% from the previous 12%. Although she had never missed a payment and owed only $500, she was told that her rate had increased because Chase had checked her credit report.

Most consumers are unaware that the banks constantly monitor all their borrowing behavior. Even if you just get too close to your borrowing limit (a figure you probably don’t know) on your cards and mortgages, as Groves did, you can trigger what the industry calls universal default.

Universal default is just one of the many hidden gotchas that credit card users often miss. Issuers can pretty much add fees and hike rates at will. In fact, if you look closely at your monthly bill you’ll see that there are already multiple rates in effect depending on whether you purchase something, take a cash advance, or use a convenience check among other things. If you get too close to your credit limit (an unidentified secret number in the issuer’s system), your interest rate can soar in the blink of an eye to the tune of 20% +. And, those are just interest rates. Issues can go wild with fees. Late fees and over limit fees are just two of the ways you can get burned. Since a 1996 Supreme Court decision ended caps on credit card fees, the average fee has nearly tripled:

In 1996, the U.S. Supreme Court in Smiley vs. Citibank lifted the existing restrictions on late penalty fees. Back then, fees ran to $5 or $10, and usually did not exceed $15. After the Court’s decision, fees soared, reaching upwards of $30. Since then, the amount of revenue the companies generate from fees (including late charges, over-the-limit fees, and charges for returned checks) has doubled. Duncan MacDonald, one of the lawyers who worked on the Smiley case, predicts penalty fees could rise to $50 in another year.

There is some hope, however. With the credit card bill of rights recently introduced into Congress, issuers would be forced into a little more accountability to the consumer.

The proposed “credit card bill of rights” says credit card issuers shall not:

  • Pull a “bait-and-switch” by raising interest rates and fees during the life of the card;
  • Charge interest on balances already paid off or repaid during the grace period;
  • Maximize interest charges by requiring consumers to pay off balances with lower interest rates before those with higher rates;
  • Charge late fees when consumers mail their payments seven days in advance of the due date;
  • Apply unfair interest rate hikes retroactively to balances incurred under the old rate.

While most people will never shun credit cards entirely, living on a cash basis can have its benefits as Dawn points out . Whether you use cash, credit, or a combination of the two you need to keep your eye on the details and the fine print (both what they say and don’t say).

Paula Gregorowicz, owner of The Paula G. Company, works with women who are ready to create their lives and businesses the way the want rather than how they were told they “should”. She is the author of the 12 part eCourse “How to Be Comfortable in Your Own Skin” which you can download for free at her website http://www.thepaulagcompany.com.