CREDIT CARD TRAP

It could happen at any time. Say you are rolling along with a big balance on your credit card, paying the minimum on time every month and comfortable with a low annual percentage rate. Suddenly you are hit with a change to a high rate of 20 or 30 percent.

Here’s why: You may have missed a payment to the doctor or an installment purchase or some other obligation, and your credit card lender had invoked something called “universal default.” That is, a default on one payment can trigger higher rates on other outstanding loans.

It’s in the fine print of the agreement you honored, whether you read it or not, when you began using the card. Maybe not in so many words. The way Citibank platinum card puts it is: “We may change the rates, fees, and terms of your account at any time for any reason. These reasons may be based on information in your credit report, such as failure to make payments to another creditor when due, amounts owed to other creditors, the number of credit accounts outstanding, or the number of credit inquiries.”

Another twist is reported in the current AARP Bulletin in a “Scam Alert” headlined “The Credit Card Sinkhole.” It warns that a late payment on your credit card can bring increases on your insurance, mortgage or car loan rates.

What to do about it? First, read and study the fine print. Mail payments at least 10 days before their due date or allow at least three days’ leeway for on-line payments. AARP says if you feel you’ve been victimized by excessive late fees, talk to your credit card company about dropping them. A local banker says a credit card company often will bargain if you say the magic word “Citibank,” meaning that you are about to switch. He adds that rolling over a big balance month after month is like an addiction to crack cocaine.

Still another recourse is to complain to the U.S. Office of the Comptroller of the Currency at l-800-613-6743.

Will Lund, director of Maine’s Office of Consumer Credit Regulation, says he is generally leery of “consumer education,” since it often is an industry smoke screen to discourage government regulation. But in this case, Maine joined most other states several years ago in deregulating its previously strict protective credit card laws, which offered no protection against out-of-state lenders.

He suggests that Maine consumers talk to loan officers at smaller Maine banks and credit unions before opting for cards from telemarketers or mass mailings. He says, “Small, local financial institutions are some of the few credit card lenders that have not jumped on the ‘universal default’ bandwagon.”