Credit Cards Are Out to Get You

If you're anything like me, you go through life having very cynical thoughts about this and that, followed by a little self-doubt, as you think, "Gee, that was probably too cynical." Well, according to the nice people at Consumer Reports magazine, if you suspect that the credit card industry is out to make as much as it can off you, you're right. Check out some highlights from an eye-opening November article titled, "Credit Cards: They really are out to get you":

  • If you're late paying a bill or you exceed your credit limit, you'll find that your interest rate gets hiked. The average penalty rate is around 24%, but some have been as high as 35%. As I detailed last year, "as of October 2004, these were the top penalty rates for some major card issuers, at least one of which has probably issued that card in your wallet: . MBNA [bought by Bank of America (NYSE: BAC  ) ], 24.99%; JPMorgan Chase (NYSE: JPM  ) , 26.74%; Morgan Stanley's (NYSE: MS  ) Discover, 24.99%; Capital One (NYSE: COF  ) , 25.9%; and American Express (NYSE: AXP  ) , 26.74%."
  • The attractive rates you're quoted may not last long. You might sign on for a 0% introductory rate, only to find that it gets hiked quickly and steeply. The fine print you probably didn't read may state that the issuer can do so, with 15 days' notice.
  • "Prior to 1978, the top 50 [credit card] issuers represented 50% of the credit card market, but by mid-2005, only five companies, American Express, Bank of America, Citigroup, JPMorgan Chase, and MBNA, controlled 65% of the market." And note -- since MBNA has just been gobbled up by Bank of America, it's just four companies now. This has consequences for us consumers, as fewer competitors often leads to less competition, which can mean higher costs for card users.
  • The grace period that cards give you in which to pay your bill before interest starts being charged has been shrinking. Don't assume you have a month to pay -- you probably don't.

You can learn a lot more surprising things about the credit card industry in our Credit Center, which also features guidance on how to manage your credit effectively. (And hey, if you're interested, we now also offer spiffy Motley Fool credit cards that are worth looking into.)

Your credit habits and record are a big deal -- being smart about credit can potentially save you tens of thousands of dollars.

Read about all things credit-related on our Consumer Credit/Credit Cards discussion board.

And finally, if you're mired in credit card debt, know that you're not alone and that you can dig yourself out. We can even help you, and we'd like to.

Bank of America and JPMorgan Chase areMotley Fool Income Investorpicks. Try a 30-day free subscription to gain access to other great dividend-paying stock ideas.

LongtimeFoolcontributorSelena Maranjiandoes not own shares of any companies mentioned in this article.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 511376, ~/Articles/ArticleHandler.aspx, 10/28/2016 12:05:51 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,225.87 56.19 0.31%
S&P 500 2,137.73 4.69 0.22%
NASD 5,221.36 5.39 0.10%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/28/2016 11:50 AM
AXP $66.83 Down -0.10 -0.15%
American Express CAPS Rating: ****
BAC $16.77 Down -0.14 -0.83%
Bank of America CAPS Rating: ****
COF $74.60 Down -0.20 -0.27%
Capital One Financ… CAPS Rating: ***
JPM $69.11 Down -0.12 -0.17%
JPMorgan Chase CAPS Rating: ****
MS $33.71 Down -0.11 -0.32%
Morgan Stanley CAPS Rating: ****