Released: July 24, 2008

Five credit-card pitfalls to know about

Source: Kelli B. Grant, Smart Money.com

These days, when a butterfly flaps its wings, a U.S. credit-card issuer raises the annual percentage rate on a consumer’s credit card.

At least that’s what it seems like, especially based on the findings of the 2008 Credit Card Survey released by nonprofit consumer advocate Consumer Action Wednesday. Of the 22 credit-card issuers surveyed, 17 (including the 10 biggest card issuers) said their policies allow them to increase a consumer’s annual percentage rate or change their terms at any time and for any reason.

Thanks to the credit crunch and a growing number of defaults, card issuers are coming down hard on borrowers. Now, even those with a stellar credit score and a solid history of paying their balance on time and in full each month aren’t safe. “It could be called abusive, really,” says Linda Sherry, a spokeswoman for Consumer Action. “[Consumers] think the issuer can’t change the rate on you unless you do something really terrible. But that’s not true in the world of credit cards.”

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