Credit Card Issuers Getting Trickier in a Tighter Market

Your credit card issuer is not your friend, or even your trusted business partner, so if you’ve been thinking along these lines, stop now.

Instead, start thinking of your credit card issuer as a slightly sleazy and overbearing salesman who controls one product you want, but who wants to trick you into buying the store. That salesman does not have your best interests at heart, and you should not trust him.

Here’s why: With annual volume approaching $500 billion and 1.4 billion pieces of plastic out there, there’s a saturation point in sight. Growth of borrowing has slowed, and the number of balances paid in full every month continues to rise. With consumers getting smarter and the market getting tighter, the issuers are getting uglier in their attempts to trap you into spending more than you intend on your card.

In addition to the usual seductive offers and sky-rocketing rates, they’re trying some new techniques such as delayed postings of your payments, mine-laden “convenience checks” and rates that bump up based on your behavior toward other unrelated issuers.

Last week, a San Francisco law firm filed a class-action suit against Providian Financial Corp., alleging that the firm delayed postings, hid terms of its card agreements, and made it seem like a fairly useless $12.95-per-month credit protection plan was a requirement when it wasn’t. The city’s prosecutors also are investigating the firm.

But don’t think that this is one bad apple in an otherwise sweet barrel.

At best, it’s a card issuer’s job to make sure it profits on your borrowings. It’s not in the company’s agenda to keep you from borrowing more than you should, or to encourage you to pay low rates instead of high ones, or to teach you to avoid the behavior that will cause you to pay more than you have to.

Learn to be similarly selfish. Use your card so that it works for you, and beware, in particular, of the following tricks and traps that are widespread now.

* The “You don’t have time to pay on time” trick. Remember when you used to have a month to make a payment? That’s typically not true anymore.

Some bills arrive a week or more after their closing date and within two weeks of their due dates. With stories of issuers taking as long as a week to post a payment, you pretty much have to open the bill when it comes in and pay it right away.

In today’s environment, one late payment can cost you a $30 late fee and push you into punitive interest rate territory. And your friendly issuer is now less likely to waive the late fee.

* The “credit purity” trick. This is a new one uncovered by Bankrate.com, a credit research Web site based in North Palm Beach, Fla.

Issuers are checking credit reports monthly and slapping punitive rates on customers who fall behind on any of their cards.

* The “convenience check” low balance trick. These checks come in the mail and encourage you to transfer balances or put extra money in your pocket.

Their low temporary rates look tempting, but buried in the fine print is usually some separate “transaction” or “check writing” charge that runs as high as 3% of the amount of the check and is posted immediately. Not only does that double your annual interest rate, it also may compound it indefinitely if you’re a balance carrier and you start paying interest on the transaction fee, too.

What’s the moral of the story? Not that your issuer should be your friend; it’s not their job to save you from yourself. That’s your job. And with the aggressive marketing climate that’s out there, your job is getting harder and harder.

Trust no one, read all that annoying small print, don’t borrow more than you should, and pay your bills on time.