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Making Money Out Of Fees – higher fees, more of them
Higher annual card fees. Initiation fees. This fee and that fee. Whatever fees they can get away with charging. At the beginning of last year, Standard Bank decided that people who kept an overdraft facility open without using it as a kind of “insurance” should pay for that too, and suddenly there was about R20 a month going on that – and no response to queries or complaints about it, either.
So it is feasible that in any old month you might end up paying a late payment fee, an over the limit fee, a balance transfer fee, a cash advance fee, a foreign exchange fee, delivery fees, a bill payment fee, an overdraft facility fee, and maybe even lawyer’s fees (the small print says you pay their legal costs, did you notice?).
Also, a monthly or annual card or membership fee, loyalty scheme fees, “club” fees – look out for all of these and maybe more. They add up! And lenders are using them more and more since the National Credit Act started cramping their style a bit – charging more, and higher, fees is a kind of loophole that lets them make up for excessive interest rates that the law doesn’t allow them to charge anymore.
Cheating you into paying late Lenders don’t want you to pay your loans off - they want you to pay forever. They don’t want you to pay on time - they want you to pay late so they can fine you. It’s even possible that they can use this as an excuse to increase your interest rate. Be aware that they may do these things ...
· change the date your payment is due;
· bring it forward a day or two early to catch you by surprise;
· make it payable on a weekend when you’re “off duty” but they’re not;
· or even if you pay on a Saturday but it’s not processed till Monday morning - they may fine you for being late;
· check the time it’s due – don’t assume that you’ve got till the end of the business day or even midnight – it might be 9 in the morning.
Don’t expect your card to tell you when you’re over your limit
It’ll be quiet as a mouse at the checkout, but then the over-the-limit charges get loaded on. So if you’re not sure if you’re at your limit or not, take care, find out for yourself – or pay the price!
Universal Default
In America there’s a sneaky thing called universal default which basically means that even if you are perfect in your payment record, a missed or late payment to someone else could give your creditor the excuse to raise your interest rate because now you’re a “more risky” payer.
Just because they feel like it
Check the small print. It gives the lender very wide powers, some of which we looked at last week. It may even give them the power to raise your fees or interest rate just because they feel like it. In fact, checking the small print is going to uncover plenty of shocking invasions of your privacy and ways in which you hand over control to them, and even agree to pay for their legal fees!
0% is a lie
If you’re offered 0% - or any amount less than the going rate - as a promotion or incentive, you really need to read the small print because they are not going to lure you into a deal only to give away their profits! Why would they do that? They will claw it all back and more – read the small print and find out how!
Higher interest rates on every cent you still owe, not just the new things
If you bought your TV at 20% interest and the rate goes up to 24% before you’ve paid it all, don’t think you’re still going to pay 20% because that was the rate when you bought it. The new rate will apply to every cent you still owe. And because in some things, particularly home loans, you don’t even start repaying capital until nearly the end of the 20 year period, the advantage of a low interest rate that you got when you bought the house during a period of low interest rates, is completely meaningless.
Your repayments will go to the lowest interest rate
If you end up with two or more different interest rates, they will apply your payments to the balance with the lower interest rate first. This is the reverse of the way you would do it if you were trying to kill debt. You would repay your most expensive debt (the one with the highest interest rate) first. They do the reverse because that’s how they get the most money out of you.
Watch out for sneaky calculations
If for some reason you have something called “double cycle billing”, you can pay interest on purchases from previous cycles. Make sure you get the kind that’s called the “Average Daily Balance” interest calculation method. Check the small print.
Any kind of “protection”
It may seem cheap to get that extra little bit of insurance that means your account balance gets paid off if anything happens to you. Sounds good, but usually it’s another way to part you from your money without giving you what you expect. Usually the fee is more than the minimum amount it would cover for you. Avoid this kind of “good idea”. No matter what the posters and the adverts say, it’s not a good idea – not for you, anyway. For them, yes!
Binding Mandatory Arbitration
Sometimes you give the lender the right to select an arbitrator of their choice if you have a dispute. This is like handing an enemy your gun. Sometimes it’s called Binding Mandatory Arbitration – but don’t expect it to be flagged so you can find it easily in the small print. Search!
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