By Heather D. Reese

This is a follow up to yesterdays post, why I love credit cards.

I find that in my life there are things that I have a love hate relationship with, credit cards are definitely one of them. I love the benefits they offer, and I’ve weeded out the bad cards in my “portfolio”, but hearing others horror stories keeps the memory of the bad cards fresh in my mind.

1. Two cycle billing. Some credit cards still do this and it’s amazing that consumers let them. Two cycle billing is often discovered by the consumer when they pay off their credit card. The next month they get a bill for interest even though they paid off the card in full last month. Not only does two cycle billing eliminate your grace period, but With two-cycle billing, the average daily balance used to calculate interest charges is calculated from two billing cycles rather than one costing you more money!

How to avoid this- Check the fine print in that little booklet that the credit card company sends you every year. If this is not your oldest most established credit card, or your highest limit one, consider replacing this card with a friendlier, single cycle credit card.

2. Universal default. This topic alone deserves it’s own post, but the skinny on this is that if you default on any obligation your credit card can impose a default rate. It can be quite a shock and surprise when you open your credit card statement and find your minimum payment doubled and your interest rate is now 30%. The ultimate betrayal is when universal default causes unrecoverable damages. Everyone has gone through issues in life, a birth, a death, a natural disaster, etc. One late payment and all your credit cards can raise their rates and what was a temporary situation that can be fixed is now a situation where you are forced into bankruptcy.

How to avoid this- Many credit card issuers are moving away from universal default… are yours? Time to call them up and ask! If you can ditch the ones that still do universal default all the better. Now before you ask why I didn’t simply say don’t pay your obligations late, let me say that all care should be taken to pay your bills on time but there are times when these things are out of our hands as in life events (like serious injury), and credit card processing errors or identity theft, and it takes time and heartache to straighten out the mess. By avoiding cards that use universal default you avoid this part of the mess.

3. High interest rates- Not too much to say on this one other than charger be ware! There is no excuse for such high interest rates. Even with less than stellar credit you can find a card with a descent interest rate. Credit unions are the best for this. Last I checked Navy Federal has a card with a regular non-promotion rate of 7.9 for purchases. That’s a great purchase rate… and it comes with rewards!

How to avoid this- Shop, shop, shop! Not for things, but for a good card. Call or surf the net to your favorite financial institution and see what they have to offer. Be sure to inquire about the rates for different uses. If you are often taking cash advances you’ll need to consider that rate too!

4. Rewards that are hard to use- Can you imagine a rewards card that only lets you use the rewards on the third Tuesday in February, but only on leap years? Okay, so this is an exaggeration, but there are some cards that make it extremely difficult to ever even use the rewards.

How to avoid this- Reading the rewards fine print will help, but a good internet search for others experiences redeeming rewards will bring the biggest insight into how easy it really will be to acquire and use your rewards.

5. Yearly membership fees- Another crap fee, pardon the expletive. Today there are so many cards out there that a yearly fee is a thing of the past, or should be. It used to be the cards with the best reward would always charge a yearly fee, this is not the case anymore. You can find a really good rewards card without a yearly fee.

How to avoid this-  Sometimes it may make sense to pay a yearly fee. Often this will be with a business card or line of credit, not so much with consumer cards. If you are really happy with the benefits your card offers and the benefit way out ways the cost of the yearly fee, keep your card, but do call up your credit card issuer every year to ask them to waive the yearly fee even if you have to threaten to close the account. They will often waive the yearly fee each year, even when they say “ this year only”!

6. Pathetic fraud protection- Credit card issuers declining charges for ridiculous reasons all in the name of fraud protection. A few years ago we were traveling for business. It was a 6 hour road trip. We filled up on gas in our home town. About 4 hours later we filled up again. I’m one of those people who hates to get too low on gas so we really just got about ½ a tank of gas then. When we reached our destination we again filled up the next day before a day of driving around. I figured we didn’t know the place too well so it was best to fill up by the hotel. Went to fill up and the charge was declined… called the issuer who told me they suspected fraud. No problem I appreciated their vigilance against unauthorized charges. I assured them with every security question that I was me, and that all was well. They said no problem, you’ll be receiving a call shortly, answer the questions and your card will be good to go again… “okay, do you want my cell phone number”, I asked? No the customer service rep responded, we’ll be calling at your home phone number… needless to say, I did not use that card for the rest of the trip!

How to avoid this- Call your credit card issuer before you travel or make out of the normal charges. Do not assume that one card is enough if that is going to be your only payment option, always bring one or two or even three cards for trips. Always try to make a photo-copy of the cards you bring when traveling in case your wallet is stolen, you’ll then have the 800 #’s of the cards that were lost and you can call and have them re-issue you a new card with a new number.

7. They make it hard to actually dispute a charge and get your money back. When you really need the fraud protection they make it as hard as possible to get your money back. Aside from the normal questions, do you have your card in your possession, when was it last used… the questions get more and more ridiculous and the credit card issuers try to side with the business more and more often, and it makes sense when you think about how much money that the businesses pay to even take credit cards, but it doesn’t make it right. Jumping through hoops is an understatement when it comes to the forms you have to fill out and then have notarized (a cost you have to eat). You’ll feel like they think you are the one committing fraud not the true criminal.

How to avoid this- Keep good records when it comes to using your credit card. Follow the disputed charge rules very carefully and write down the name of the customer service rep. you deal with along with notes of your conversations. Most importantly, check your credit card and bank statements at least monthly… if you have quicken or other money management software you should be downloading your charges daily and looking for inconsistencies.

8. American expresses financial review- Few have heard of this fun little game that Amex. plays until they ask you to play! Normally Amex. only issues a financial review when you have both a charge card (no set limit, pay in full monthly) and a credit card. This combo seems to set them off. An Amex financial review will include providing them with pay stubs, bank statements, your blood type and your first born. Well maybe not all those things, but by the time your done you’ll feel like you did give blood and not only will they likely still close your accounts, but it’ll hurt your credit report to have an account read “closed by credit grantor”.

How to avoid this-Consider having either a charge card or a credit card through American Express, not both.


9. Non existent customer service. You need an answer to a simple question. You Can’t log -on to your account online, you need to change your address… there are lot’s of reasons to need to call your credit card issuers, and you have been on hold for over an hour and all you can do is keep going through their automated system, yet they promise your call will be answered by the next available rep… of and your call is REALLLLLLYYYYY important! Customer service is just not like it used to be and credit cards seem to have the worst!

How to avoid this- There might be no way to avoid this, but you can at least plan for it. Call your credit cards during off peak hours, normally early morning Tuesday-Thursday. Keep notes of who you talk to and if you are not satisfied ask to speak to a supervisor. If you are still not happy send them a letter. It’s easy to find the head cheeses info on the internet now, the office of the president normally has a “gripe” department that really does try to help and often can and will.

10. Pre-approved offers. I hate pre-approved offers. I’ve opted-out, deleted myself from mailing lists and I still get pre-approved offers… my shredder is overflowing with these offers. My shredder actually overheats and smokes. I hate all the waste and I hate having to sit for hours every month and shred unwanted offers. At least most credit cards offers now come without your name on the fake credit card in the letters, those fake cards were the worst on my shredder, and we all know I’m too money conscience to buy a new shredder until mine completely stops shredding!

How to avoid this- Opt-out, be added to all do not call and do not mail lists, and don’t be like me, buy a bigger better shredder. In today’s world your best defense from identity theft is a shredder and never revealing personal information to those who really do not need it. Carefully read all of the fine print that you are send from your creditors each year and individually opt out to each creditor.

The moral of the story is that it’s all about finding the right card for you.