The Bizarro World of Credit Cards

If your credit card statement shows a due date of May 14th, you’d assume that if your payment landed at the issuer on May 14th you’d have paid your bill on time, right? Wrong.

Your credit card issuer may have not only a due date but a due TIME. Maybe it’s 8:00am eastern or 12:00pm central. So if your payment gets to your credit card issuer at 3:00pm eastern on May 14th, you might get hit with a late fee as well as an increase in your interest rate. But it doesn’t stop there. Your other cards are watching and they’ll say, “Oh no! He paid late—he’s in trouble. Time to raise our rates too.”

This is the bizarro land of credit cards that we live in, and have lived in for decades. Though the ability of credit card companies to treat us like loan sharks has always been there, only now as they get squeezed are we seeing the true colors of these agreements we sign—the devil is truly in the details.

So it’s with frustrated pleasure that many of us watched or heard President Obama today hold his town hall on credit card reform, chastising credit card companies for selling us a bundle of bad goods, all under the pretences of an “agreement” (that fine print that we think is a contract, but isn’t).

The Fed has already passed several new rules to rein card issuers in but they don’t go into effect until July 2010 and the regulations that went through the House recently also don’t go into effect until next year. But in the meantime, we are being slammed by credit card companies gone wild. (Check out the letter I got from one of my cards saying that they’ve done me the favor of closing my account—and messing with my credit score as a result, thank you very much.)

Now, if you don’t carry balances, much of this doesn’t worry you but it should because for many of us, credit cards come into play in the worst of times. To the President’s point, in this economy, when jobs are still dropping like 500,000+ flies every month, plastic comes to the rescue. But then the keepers of that plastic decide to make it the most expensive time in your relationship. When you’re down, can you really afford a 20 percent interest rate hike? Of course we as a nation need to cut down our dependence on plastic—living beyond our means especially for the last decade. This is the wake up call a chunk of us needed to stop thinking that that $2,000 limit makes that $2,000 our money. It’s not and never has been.

So as Washington swoops in to stop the credit card company money-making party, we have to ask: if these reforms don’t pass sooner than July 2010, just how bad will it get between now and then? Protect yourself. Pay down that debt as soon as possible and stay tuned. In the end, credit card reform will cost companies billions and that will make borrowing pricier, but having rights and knowing what we’re in for is worth it.