Credit Card Fraud? 

The credit card industry earns 1.2 trillion every year and almost half of their revenue is derived from late payment fees. This is why many consumer watch groups have accused credit card companies of purposely adopting policies to "trick" their customers into paying late. Late fee charges are not the only method companies use to rake in billions each year. There are also the credit insurance programs, raising your interest rate even when you've always paid on time and other tactics. Many of the major issuers -- First USA, Chase, Capital One, Providian, Citibank -- have been sued over practices regarding unfair billing practices and accused of blatantly using tactics to cheat customers out of money. Some of these tactics are outlined below.

  Is this credit card fraud or just tricky business?

Not posting your payment on the day it's received -- Federal law requires credit card companies to post your payment on the date it is received. If they fail to do so, they cannot assess you late charges or added finance charges. Still, a common tactic most card issuers use is to post only those payments received by 9:00 a.m. on a given date. Payments received at 9:01 a.m. are posted the next day. This results in significant added revenue for them in the form of late fees ($29 a pop). Although major card issuers have payment processing centers that operate 24-hours a day, seven days a week, they state that they will not mark payments received on Saturday and Sunday until the following Monday -- bringing in millions more in $29.00 late fees for those customers who waited until the last minute to send in a payment. Best way to fight back: Send in your payment within two days of receiving your monthly statement. Arrange to make your payments by electronic transfer by signing up at your card issuer's website so you can quickly zap a payment to them and they can't claim that they didn't receive your mailed payment until after the due date.


Tricking you in to paying late -- Federal law requires that credit card issuers mail you your statement at least two weeks before the due date, so companies have to resort to other tactics to get you to pay late. You know that your credit card payment is due on the 25th of the month, or do you? Your issuer might suddenly change it to the 20th of each month to try and get you to mail it in late. If it's received late, they will slap you with a $29.00 late fee. If it's late two or more times, they can legally increase your interest rate dramatically, as much as 10 points. At various times, several credit card issuers have even resorted to not mailing out statements at all to encourage customers to pay late. Best way to fight back: Send in your payment within two days of receiving your monthly statement. Arrange to make your payments by electronic transfer by signing up at your card issuer's website so you can quickly zap a payment to them and they can't claim that they didn't receive your mailed payment until after the due date. 

Penalizing you for carrying a big balance -- If your card has a high balance, don't be surprised if one day you receive a letter in the mail telling you that your interest rate is being increased dramatically because your card balance is too high. This tactic is getting more and more common, so beware. Another tactic is to check your credit report regularly to see how much you're charging on other cards. If they deem it to be excessive, they will raise your rate with the excuse that you are a high risk customer. How to fight back: Always pay your bills on time and don't just pay the minimum due each month. If you can't pay the cards of quickly, send it at least $30 more than the minimum due each month. Don't accumulate too much debt.


Credit Insurance -- This scam is used almost universally by the big credit card companies. You don't need this insurance and, even if you tried to take advantage of it, you probably couldn't. This is one of the greatest scams the credit card industry ever invented. For X amount each month, they promise to pay off your balance if you become unemployed or ill. But, actually, if you read the terms very carefully, you will realize that the odds of you ever getting a dime out of them are tremendously high. Sometimes credit card companies don't even bother to get you to enroll in this program -- they just sign you up without your permission and start charging you for it. Credit insurance is a huge cash cow for the credit card industry. Imagine getting people to pay you $10, $20 or $30 for insurance when you never pay anything back in claims! Credit card companies usually are forced to pay large judgments for this type of scam. In particular, Providian was forced to pay the largest judgment ever when it enrolled customers in credit insurance programs without their knowledge.