An industry dedicated to screwing its customers

I recently screwed up and paid a credit card bill late. I forgot to make the payment until after the 5 pm EDT cut-off, and got hit with a $39 late fee.

The funny thing is this: I actually made this payment two days before the actual due date. But it was still considered late.

Why? The due date fell on a Sunday. However, payments made after 5 pm on Friday are not processed until the following Monday: the date after the "due date" printed on my bill.

Pretty slick, huh? By allowing due dates to fall on days when payments are not processed, the bank is effectively shortening the billing cycle, thereby making it more likely that payments will be late and, in turn, generating more revenue from late fees.

I sent a message to my bank's customer service department, asking them just how it was possible for payments to be "due" on days, such as Sundays, where actual payment is impossible. The response I received, of course, was laughably worthless: it was a patronizing form letter which did not address my question at all. Such is big bank customer service these days.

This trick is just one of the many mechanisms used by credit card companies which are designed to wring as much money as they can out of their customers. "Pay to pay" fees are charges that banks assess when one pays a bill by phone. Double-cycle billing is a process by which banks use 60-day account histories, rather than the standard 30-day billing cycle, to determine interest charges. Universal default is a mechanism that allows bank A to raise your interest rate simply because you were once late paying bank B. Interest rates can be raised at any time and for any reason, and can be applied retroactively to debt that was incurred before the rate was increased. Then there are the ever-increasing fees - annual fees, late fees, over-the-limit fees - that banks levy on their customers. A local construction worker recently got hit with not one, but two of these fees when he missed a payment deadline by half an hour:

Steve Gutierrez of Houston says he was recently hit by a $29 late payment after he paid online 31 minutes after a 3 p.m. deadline. Because his late payment also caused his account to exceed his credit limit, he was socked with a $29 over-the-limit fee. His 31-minutes-late payment cost him nearly $60.

"I've made mistakes, and I've overlooked the fee," Gutierrez says. "But with the over-the-limit fee, it's getting steep." As a customer since 2001, he expected his bank to waive at least one of the two fees. But it said no. He canceled the card.

One could argue that he could have avoided these fees had he paid his bill on time. One could also argue that Mr. Gutierrez shouldn't have allowed himself to run his credit card to the limit in the first place. These are certainly valid criticisms. I would even argue that he's lucky he was only hit with a $29 late fee; as I mentioned, my late-payment fee was $39. But are the size of these fees really justified? What's to stop credit banks from eventually imposing $50 or even $100 late fees, anyway? And couldn't his bank's customer service department, if for no other reason than to act in good faith towards a six-year customer, at least cut him some sort of a break?

To be sure, the customer is not without blame. Too many people simply don't understand credit; they obtain a credit card, go on massive spending binges, and end up hopelessly in debt. We as a society use credit to consume beyond our means; we willingly put ourselves at the mercy of these banks. If people would use credit more wisely, such as by eschewing purchases they can't afford, paying off balances in full every month or at least keeping their revolving debt to a minimum, they wouldn't be as susceptible to these charges.

But those who argue that people who allow themselves to get into credit card debt are getting what they deserve are missing the point: some of the practices employed by credit card companies are nothing short of predatory. They are designed to deceive and to fleece even the most responsible of credit card holders. Even if you pay off your balance every month, after all, the banks will try to get money from you by increasing annual fees or by shortening the billing cycle.

Credit cards are no longer a convenience; in our increasingly-cashless society, they are all but a necessity. For many people, credit cards are the only way to build a credit history that will one day allow them to buy a house or a car or even get a job (since employers use the credit reports of perspective employees as part of their hiring process). A person without credit is a second-class citizen in today's society. The banks know that we really don't have much of a choice: we have to carry plastic, and we therefore have to play by their rules, no matter how unfair or how usurious they might be.

Senators Carl Levin of Michigan and Claire McCaskill of Missouri have introduced a bill that would regulate or even prohibit some of the tricks that credit banks use to extract more money from debtors, including universal default or retroactive interest. Of course, I don't have high hopes that this legislation will go anywhere: the banking industry will throw millions of dollars at their lobbyists, and the campaign funds of sympathetic politicians, in order to defeat this bill.

Certainly, there are a lot of common-sense things that we as credit card holders can do in order to keep our vulnerability to a minimum. Live within your means: if you really want that 52" plasma HDTV, save up for it. Don't be suckered in by offers of cards with low introductory rates that magically balloon into 21% APR after only a few months. If possible, use your credit cards only for emergency purchases. If you must use plastic, use debit instead of credit. Pay off all of your credit card balances: financial advisers generally say that one will see more financial return in paying off credit cards - and avoiding interest rates - then one will see by investing in stocks or bonds or CDs. Check your credit history on a regular basis, not only to ensure that you are not a victim of identity theft but also to make sure that there are not errors from reporting creditors.

I'm trying to follow these steps, myself. It's not always easy - paying off my residual debt will be a long process - but I hope that, by using credit in a wiser manner, I can lessen my exposure to the cynical and predatory practices of credit card companies. I am convinced that credit card banks are indeed an industry whose main focus is to squeeze as much money as they can from their customer base. Because, after all, they can.