Max: The New Debtor's Prison

Credit Card Companies Use Tricks And Traps To Trap Users In Debt

An example of what credit card-issuing banks do to people was given to the Senate Subcommittee on Investigations, where Alys Cohen of the National Consumer Law Center, testified about 'a young Navy sailor who opened a credit card account with First Premier Bank on November 21, 2006. The credit card had a $250 credit limit and a 9.9 percent APR for purchases. The same day that the sailor opened the account, he was assessed two fees — a 'Program Fee' of $95 and an 'Account Set-Up Fee' of $29. The next day (November 22), he was assessed a participation fee of $6. Three days later (November 24), he was assessed an annual fee of $48. When this young sailor received his first month bill, which had a closing date of Nov. 24, 2006, he had already accrued a balance of $178, without making a single purchase.

'The next week, the young sailor used the credit card for four transactions totaling $84.85.On Dec. 22, 2006, he was assessed a participation fee of $6. With all these fees, the young sailor was already over his credit limit, despite making less than $85 in purchases on a card with a $250 limit. He was assessed an over-limit fee of $25 and a late fee of $25, plus a finance charge of $1.96, on Dec. 26. He now owed a balance of $320.81.