Credit Card Companies Skirt New Rules – Part II

As a follow-up to last week’s blog, I’ve discovered more tricks credit card companies are using to get around the new rules.

Here are some charges consumers need to watch. Some are obvious, others require close scrutiny. The first category is fees. These include inactivity fees, where the credit cards will charge for the audacity of not using the card. Also, those free balance transfers will be harder to find. Lenders are hiking fees on those as well.

The next category is rate increases. These are harder to detect, but also more costly, potentially. According to the Center for Responsible Lending, one neat trick is already costing consumers an extra $720 million a year. Here’s how it works. Credit card companies will tag the interest rate to the highest prime rate over some period of time (e.g. past 90 days). This ensures the rate will rise quickly, and fall slower. In the past, it was typically tied to the prime rate, and thus would fluctuate based on the Fed’s interest rate decisions.

As consumers, we all need to read the fine print. As investors, we need to read the footnotes. To paraphrase from the old E.F. Hutton commercial, I like to invest in companies that make money the old fashioned way.