Image by katemangostar on Freepik
By Ivan Serrano
Published October 19, 2023
Owning a credit card provides various perks, like allowing customers to earn significant points and rewards that come with every purchase. Using one is also excellent for building credit, which is vital if a person wants to make a major investment, such as a car or a house.
However, while credit cards are popular, they’re also known for the risks involved. Many stories of debts and low credit scores are associated with credit card use, often because of a cardholder’s lack of understanding of standard industry terms and conditions.
Unfortunately, some credit card providers rely on such poor management and comprehension to drive more potential customers. Through various deceptive techniques, these malicious tactics encourage unknowing people to get their financial products and lead them to more unexpected costs.
Aside from worrying about security threats, like identity theft, credit card owners must worry about deceitful providers and their schemes to make more money off of them.
Don’t be a victim of these deceptions! This guide below will help you navigate the most common dishonest or misleading tactics that aim to trick consumers.
Below are some of the most suspicious practices done by deceitful credit card companies. Understanding the following will help you build your knowledge and protect yourself better from such methods:
Many credit card providers advertise extremely low introductory annual percentage rates (APRs) to attract prospective customers. (The APR is the rate of interest the provider charges on any balance you carry.) However, these rates are generally temporary and only last a few months to a year. When that period ends, the credit card account will go back to its regular APR, which could significantly increase depending on your creditworthiness. Aside from that, you could face higher interest rates later if you fail to pay off your balances during the introductory period.
Low introductory APRs (sometimes called “teaser rates”) create a false sense of security and affordability. With the attractive initial offer, some cardholders may be tempted to make a large purchase or have a balance on their credit cards, which increases the chances of overspending and debt. This is why some companies promote zero percent introductory rates to make themselves seem more appealing to potential buyers.
Credit repair is the process of fixing a person’s credit history and credit score after it has progressively worsened due to different factors. Generally, it can involve various assessments and investigations by credit repair companies to help individuals determine where their credit scores deteriorated. Their reports allow customers to file disputes for inaccurate information, catch fraudulent transactions, and improve credit scores.
People are also able to pursue steps for credit repair on their own. However, the steps involved can be confusing. This is why there is a market for credit repair companies.
Meanwhile, some credit card issuers will use this practice to attract customers to open an account. Some will promote their ability to remove a person’s negative credit information, which sounds enticing, but you should know that it’s against the law to guarantee results. According to the Federal Trade Commission, no legitimate credit repair organization can promise such a service because they don’t have the power to do so.
A fake free trial is a common deceptive marketing practice where an organization offers a free trial period but discreetly incorporates undisclosed fees or conditions. Some companies do this by enticing potential customers with limited-time offers, no upfront payments, or other deals for their free trials. They then bury their terms and conditions in the fine print to deceive customers into accepting associated fees during their trial period. Many will only notice these unauthorized charges once they receive their credit card statements.
Worse, these free trial scams often involve a complicated canceling process. Providers may require numerous steps, or their customer service may be unresponsive, leaving customers with a piling debt to pay.
In the case of credit cards specifically, keep an eye out for whether a card really has no annual fee, or is just waived for the first year. They may be counting on you to not remember that fee before the card comes up for renewal.
When credit card users only pay for the minimum required on their balance each month, they risk increasing their interest charges. This keeps them in a prolonged debt because a significant portion of their payments covers such costs, and only a tiny part of it affects the principal balance. This is called the minimum payment trap, and some credit card providers may actually use this to keep their customers in debt.
Many credit card statements may prominently display a minimum payment amount. To those unaware, these will seem like credit card companies are being generous by offering an affordable baseline to their customers.
Some may even use this as a part of a limited-time offer deal to make it more enticing. However, when that period ends, the customers will face high-interest charges if they don’t pay their balance soon. This is one of the many reasons people are buried deep in their credit card debts.
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Generally, a balance transfer is a credit card transaction where a person moves their debt from one account to another. This concept works similarly to credit card consolidation, which borrowers use to pay for their personal loans in a more organized and affordable way. With this method, you can combine multiple balances into one transfer account. This way, you can focus on one payment instead of making several each month, allowing you to manage your transactions better.
Another benefit of balance transferring is the potential to save money on interest. Some balance transfer cards offer an introductory zero percent APR for a specific period. In doing so, you maximize your money by paying the principal balance instead of its monthly interest charges.
Meanwhile, a balance transfer has its disadvantages. For one, you may still have to pay a balance transfer fee that ranges around three percent to five percent of the amount. Plus, low interest rates on transfer accounts don’t last forever, and some cardholders might overlook this, leaving them with higher charges as their debts continue.
It’s also worth noting that transferring a balance doesn’t eliminate or reduce debt. If you don’t pay the right amount immediately, you only risk adding more to your current balance.
Many issuers are aware of a balance transfer’s limitations. Some even use it to attract potential customers to open new credit card accounts, only to bury them in more debt. For instance, issuers might hide fees or overly promote balance transfers without disclosing their disadvantages.
Deceptive credit card issuers may exaggerate a few perks to attract potential customers and hide significant charges. Some issuers oversell benefits such as sign-up bonuses, increased credit limits, low-interest rates, no annual fees, and cash-back guarantees to get people to sign without understanding the terms and conditions. Others would go as far as providing travel perks or exclusive VIP access to events. However, these offers often come with restrictions that are not as appealing as they are made out to be.
The fine print refers to the small, often packed text in documents like contracts, agreements, and other vital written materials. These texts contain crucial details like terms, limitations, disclosures, or any essential information their readers must know.
Unfortunately, some credit card issuers are notorious for manipulating the fine print to deceive potential customers. They use this to hide fees, interest rates, and payment terms. Because of how they’re written, customers often miss such vital details, making them victims of unauthorized charges. Sadly, they won’t be able to hold the providers accountable because of their signature in the document.
The key to avoiding these deceptive tactics is being skeptical and knowledgeable. If an offer sounds too good to be true, it might well be. Keep in mind the ways we’ve covered that companies exaggerate various benefits and conceal hidden charges and unauthorized costs.
Don’t rush into applying for a credit card, even if they provide an enticing limited-time-only deal. Do your research and understand the terms thoroughly, particularly the fine print. Look for hidden charges and other questionable requirements. You can also compare multiple offers from more known credit card companies, such as American Express, Discover, and Chase.
If you decide to open an account, always monitor your statements for unauthorized or unexpected transaction fees. Once you spot these discrepancies, report them to the credit card issuer or the authorities immediately.
Remember that some deceptive practices are illegal. If you encounter questionable practices, you can report them to regulators like the Federal Trade Commission and the Consumer Financial Protection Bureau (CFPB).
Another way to ensure your safety is to seek advice from a trusted personal finance advisor, especially if the credit card offer is unclear.
Many deceptive credit card companies rely on a person’s lack of knowledge and experience for their tactics to work. Understanding the practices above will help strengthen your defenses against such misleading and manipulative methods.
Make it a habit to take a proactive and informed approach, even if you’re dealing with a reputable credit card provider. This way, you protect yourself from any illegal or dishonest attempts to part you from your hard-earned money.
Ivan Serrano has been been a technology and business writer since 2015. He is obsessed with our constantly evolving fast-paced society and finding ways to teach readers something new. He has worked with companies like SmallBizClub, StartupNation, Namecheap, Time Doctor, and Searcheye—which has a business relationship with FairShake.
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