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Over the last few months, a lot of information has been on the news about credit card companies and their practices.  Some of these practices have so enraged the public that Congress is holding hearings and meetings to try to find a way to force these credit card companies to amend their worst practices and intend to make these changes into law with the Credit Cardholder’s Bill Of Rights.  Some of these practices many people have heard of but many more often go unnoticed until they begin to negatively affect the card holder’s finances.

Practice 1 – Universal Default Clauses

The universal default clause present in many credit card agreements is one of the main reasons why many people receive an interest rate increase on their credit card.  Under a universal default clause, being late with or missing a payment on any account that is monitored by one of the three major credit reporting bureaus acts as a default on the credit card, allowing the credit card company to increase the interest rate that you are being charged on their credit card to the maximum amount.  In many cases, paying an account two hours late can trigger an interest rate increase of 15% or more, which is also retroactively to any balance that is being carried on the credit card.

Practice 2 – Double Cycle Billing

Double cycle billing has become more prevalent in the last few years as more credit card companies find that they can get away with the practice without much hassle from the general public or industry regulators.  Double cycle billing occurs when the credit card company levies a finance charge for the account that is based not only the current balance of the account, but the previous months balance as well.  People that make large payments on the account are still charged finance charges on the portion of the debt that they have paid off, which allows the credit card company to make more money off of the card holders.

Practice 3 – Anytime, Any Reason Interest Rate Hikes

A little known clause in many credit card agreements states that the credit card company reserves the right to increase the interest rate on a credit card account at any time for any reason that they deem necessary.  Many people were not concerned about this clause in their credit card agreements until the recent financial crises hit and many credit card companies used the crises as an excuse to increase the rates of large numbers of credit card holders by a significant amount – often by more than 10%.  This higher interest rate applied to the entire balance carried on the credit card, causing significant financial hardship to people that had a large balance on the credit card at the time of the interest rate increase.

These practices and several more are now being debated by lawmakers to determine what practices are fair business practices and which ones are taking unfair advantage of credit card holders.  Congress is considering passing a Credit Cardholder’s Bill Of Rights to curb some of the worst abuses of the credit card industry and level the paying field for all consumers.