To the Editor-McKegney

October 22, 2004

It’s been said that the devil is in the details. That old adage couldn’t be truer for credit card consumers these days.

While most consumers shop for a credit card by comparing interest rates, the real costs may be hidden in the fine print. That’s because as interest rates have become more competitive, card companies are increasingly using late fees and penalties like "universal default" to capture more revenue.

Under a "universal default" policy, some credit card companies automatically hike their customer's interest rate – sometimes to as high as 30% - for missing a payment, even if they missed a payment on a different card issued by a different company. That means even if a consumer was never late or missed a payment on a particular credit card, they could still be penalized with a dramatic interest rate hike on the balance due on that card for being late or missing a payment on another card.

Consumers need to know that interest rates – particularly low introductory rates – are not always a good indicator of what a credit card will truly cost. They need to be careful shoppers. They need to read and ask about all the fine print, particularly the late fees and penalties – especially penalties like "universal default."

If you're going to carry a balance on your card from month to month, the fees and penalties may be more critical than the initial interest rate. If a card has high fees, a short grace period or a universal default policy, you may want to keep shopping for a friendlier card. And don’t forget to read the fine print.

For more information about "universal default" and other tricks creditors use, check out the Consumers for Responsible Credit Solutions website at www.responsiblecredit.com. (Consumers for Responsible Credit Solutions is a national consumer advocacy organization.)

Sincerely,

Darrell McKigney

Executive Director

Consumers for Responsible Credit Solutions

607 14th Street, N.W., Suite 500, Washington, DC 20005