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3 Reasons to Read the Fine Print

Don't ever let me tell you that I have it hard. Even though I've collected nearly $60,000 in debt, I've never suffered the loss of one of my three children to a credit card.

What, that sounds silly? It's anything but, unfortunately. A new documentary film called Maxed Out, due to reach theaters in select markets on Friday, tells of how two college students committed suicide over their debts.

I have no words to console parents who have lost kids for any reason. But to lose a child over debt? That's simply infuriating.

Waiting in the tall grass
Not that I'm in favor of the nanny state. On the whole, I'm a firm believer in personal responsibility. But there's something insidious about how credit card operators make their profits. Especially this one.

Yet even reputable financiers like American Express (NYSE: AXP  ) , Citigroup (NYSE: C  ) , JPMorgan (NYSE: JPM  ) , and MasterCard (NYSE: MA  ) use less-than-savory fees to encourage keeping -- and holding -- a balance for years. Here are three of the worst tricks, provided courtesy of Curtis Arnold of Cardratings.com:

1. Nothing to see here. Some cards won't mail you a bill unless there's activity, even if you're carrying a balance and have a payment due. Says Arnold, "you may easily forget to pay the monthly due amount on the balance ... and default on your [low] rate. Plus you get charged (obviously!) a late fee of up to 39 bucks."

2. Don't forget to pay the rent. Other cards prefer you pay them monthly for the space in your wallet that they occupy. Talk about bold. But don't expect them to admit to anything. Arnold says that issuers of cards with monthly fees are often advertised as having no annual fee.

3. Hello? Are you going to buy anything? But my favorite is the inactivity fee. Take the OptOne Prepaid MasterCard, a debit card that also offers unsecured cash advances. Arnold singled it out in an email to me because of what it says in the fine print:

"If your account remains inactive (no transactions are made) for ninety (90) days, you will be charged the $15 Monthly Inactive Account Fee, unless your card balance is $0 (or less) in which case your card will be automatically closed (canceled). A fee may be charged to re-activate or re-issue a card, in the event it has been automatically closed due to inactivity."

Translation: Pay us or we'll close your account. And did we mention that it will cost you $15 to pull the needle?

Prepare your teen for the worst
And I do mean needle. Debt for the desperate is like crack for the junkie. What other explanation is there for the needless deaths of teens who were filled with such despair that they felt compelled to end the suffering permanently?

Here's my point. Credit, though a useful tool, bears a sharp edge. And credit issuers have great incentives to get, and keep, their customers in debt -- hence the hidden fees. So, before you hand your teen a credit card, be sure to explain the dangers. That simple act could save their lives.

Better yet, to teach your kids about the uses and dangers of credit, consider sharing a subscription to our Motley Fool Green Light newsletter service with your kids. Therein, co-advisors Dayana Yochim and Shannon Zimmerman show you how to unlock the hidden fortune inside your paycheck. You'll find tips worth $1,717 in the February issue alone. Click here to get your copy and 30 days of free access to the service. There's no obligation to subscribe.

JPMorgan is an Income Investor pick, while MasterCard is an Inside Value choice. The Motley Fool's disclosure policy is a credit to the industry.

Fool contributor Tim Beyers, who is ranked 1,333 out of more than 23,800 in our Motley Fool CAPS investor intelligence database, writes weekly about personal finance and investing basics. Have a Foolish money tip? Tell him.

Tim didn't own shares in any of the companies mentioned in this story at the time of publication. All of Tim's portfolio holdings can be found at his Fool profile. His thoughts on debt, Foolishness, and investing in general may be found in his blog.


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Tim Beyers
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Tim Beyers first began writing for the Fool in 2003. Today, he's an analyst for Motley Fool Rule Breakers and Motley Fool Supernova. At Fool.com, he covers disruptive ideas in technology and entertainment, though you'll most often find him writing and talking about the business of comics. Find him online at timbeyers.me or send email to tbeyers@fool.com. For more insights, follow Tim on Google+ and Twitter.

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