A Company's Credit Secret: How They Are So Profitable

Credit card companies have many a credit secret that allows them to stay profitable, often at the expense of the consumer. By knowing the secret, you can possibly manage to avoid some of the secret fees that make a credit card company profitable and make the consumers poorer.

Lack of Regulation
The Better Business Bureau says that the credit card industry generates more complaints than any other industry. Consumers are unhappy with their tactics and practices, but they don’t need to be responsive to the irritated, dissatisfied customers in part because the industry has very little regulation.

Customers don’t have the influence to bring the tactics under control, and the industry does not have a single regulator who has the authority and determination to stop secret practices of the industry.

The OCC (Office of the Comptroller of the Currency) is the regulating body that could affect the policies of the industry, but up until now has not done so. They have warned banks who issue the cards about their unfair practices, but stop short of banning the practices. Banks, therefore, keep them up.

Deceptive Advertising
Banks and the credit cards they issue are notorious for misleading promotional material.

One of the favorite credit secret tactics is to heavily advertise a promotional rate for a new cardholder or a balance transfer offer. The promotional rate is splashed all over the material, but it is nearly impossible to find any information about what the rate changes to after the introductory period or what constitutes a default.

Even more, it is difficult to find out what the rate goes to if you default.

One reason companies are so intent on hiding this information is that the rate often jumps to an exorbitant amount if the creditor defaults or when the introductory period is over.

Unreasonable “Default” Conditions
The fine print of hard to discover default conditions is also often hidden for a good reason – the default terms are unreasonable and inflexible.

More and more cards are triggering default interest rates of 20 percent to 30 percent for a single payment that is late by even a few hours or one day.

The credit card companies may also impose this rate if the consumer takes out a new line of credit from another lender – even if payments are current and the balance is low on the credit card.

Over balance fees can be triggered by even one or two dollars overage with no consideration for payments that are in the mail or pending.

Unfair Posting Practices
A credit card bill payment is not credited to your account until is it posted by the computer or by an employee of the company. For this reason, the credit card companies are beginning to schedule payments with due dates on holidays and weekends, hoping to trap consumers into a late payment.

In these cases, the payment may arrive on time, but not get posted for 3 or 4 days, resulting in a late payment and a fee.