Consumers have developed a love-hate relationship with their credit cards. They love the convenience of swiping plastic for purchases, but they hate the sneaky little fees and finance charges initiated by credit card companies.

Al Gore once said that the only way people will take action is if there's a crisis. While the sly practices initiated by credit card companies may not constitute an emergency, they're shady enough to motivate consumers to take action.

Commonly buried deep in the fine print of a credit card agreement, these tricky maneuvers include finance charges and user fees. The actual structure of the charges tends to be so confusing that most people tolerate the nickel-and-diming rather than trying to understand the costs. This brief overview will clarify some of the more common practices.

1. Retroactive rate increase

There's no company in the land that could get away with raising prices on current merchandise-and for past merchandise, too. Unless, of course, you're talking about credit card companies. When they increase interest rates, they don't apply the spike only to new purchases-they include your existing balance, as well.

2. Pay more by default

A favorite tactic of credit card companies is to include a Universal Default Clause in your credit card agreement. This stipulates that the interest rate on your current card can be raised if you make a late payment on your mortgage, auto loan, or any other account, even if you pay your credit card on time. These and other negative credit behaviors will show up on your credit report, and will trigger what can be a hefty rate increase by your credit card company.

3. Double trouble

Known as double-cycle or two-cycle billing, the credit card company uses this finance charge to make you pay the interest on two months of charges. For example, assume you had a balance of $1,000, and you paid off everything except $100. The following month, you'd be charged for the interest on that full $1,000-not just the $100 that you carried over.

4. The (dis)grace period

Most credit card companies will claim that you have a 30-day grace period in which you can pay your balance free from interest charges. This 30-day period applies only if you pay 100 percent of the balance. If you carry over the tiniest amount, you'll be charged a finance charge based on the full amount.

5. Convenience will cost

If you make a credit card payment using a pay-by-phone or online arrangement, you'll probably have to pay a fee, with amounts ranging from $5 to $20.

These sneaky practices may not constitute a consumer crisis, so Gore's theory may hold true: You may just choose to cut your check and not deal with all the billing hassles. However, if you're tired of confusing charges and tricky stipulations, call upon your most powerful weapon as a consumer: Take your business and hard earned cash elsewhere.

Published on October 2, 2007