Fine-print pitfalls

If you're sick of "Jingle Bells" and "Deck the Halls," Consumers Union has a new tune to get stuck in your head.

"It's Always Christmas Time for Visa," an animated music video that can be found at www.creditcardreform.org, is described by the organization as a "lighthearted take" on credit card fees, interest rate increases, and mind-numbingly complex and oh-so-tiny fine print.

There's nothing lighthearted about being slammed by $30 fees and 30 percent interest rates. So it's no wonder young people feel burdened by their credit card bills.

More than half of 18- to 24-year-olds asked about their holiday credit card bills were "somewhat" or "very concerned" about their ability to pay off the balances. One-third of 25- to 34-year-olds felt the same way in the survey, commissioned by the Consumer Federation of America and the Credit Union National Association.

One way to ensure you don't end up owing even more on your credit cards is to scour your cards' terms before cleaning out the mall.

But I'm a realist. So instead, I asked three experts to share the credit card practices that commonly ding unknowing consumers.

Watch your credit limit: Do you know how much you've been approved to charge on your credit card? You'd better. Go to charge a gift that will put you over the limit and credit card companies will almost always allow the transaction to go through, then ding you with fees.

"We don't think credit card companies should be charging fees for a transaction they approve," said Travis Plunkett, legislative director for Consumer Federation of America.

Say grace: Most credit cards have a period of time in which the purchases you made are not charged interest. That's called the grace period, and it typically lasts around 25 days. After that, you get a bill and must pay the entire balance by the due date or "you're nailed" with a finance charge, said Bill Hardekopf, CEO of the credit card website LowCards.com.

Beware of fees: Pay late and you'll be nicked an average of $34. Exceed your credit limit and you'll pay about $31, according to a recent report by the Government Accountability Office.

Understand universal default: Fail to make a timely payment to one creditor and you may be unpleasantly surprised by an interest rate increase on your other credit cards -- even if you've never been a day late paying them. This practice is called "universal default."

A drop in your credit score also can trigger universal default. Often, those interest rates are retroactive, meaning you could be paying a much higher interest rate on that present you bought years ago.

Watch for two-cycle billing: You'd think that bedroom set you paid off last month would mean no interest to pay for it this month. Wrong, if your company uses two-cycle billing. Many companies will charge you interest based on your purchases in the past two months. "It's an oldie but baddie," Plunkett said of the practice. "Ask 100 people about this and 100 people are going to say it's not fair. So why does it still exist?"

The reality of rewards: Whether it's airline miles, points for merchandise or cash back for purchases, promotions for attractive rewards cards are everywhere. But what they don't openly advertise are the caps many of them have on how much you can earn. That's true "especially on the cash-back cards," said Justin McHenry, research director of IndexCreditCards.com.

If you carry a balance, ignore rewards and focus instead on finding a low interest rate.

Tenuous teasers: Low- or no-interest balance transfers are everywhere. But be careful.

"Consumers think, 'Hey, for six months I'm not charged interest so I'm just going to go out and buy a piano,' " Hardekopf said.

Not so. Many cards reserve that special rate for transferred balances only, charging a standard rate for new purchases. And most cards apply payments to the transactions with the lowest interest rate first. So you'll pay interest after all unless you pay the bill in full.

Don't get me wrong. Credit cards themselves are very convenient. If used wisely, you can essentially borrow money from credit card companies to make all your purchases and never pay them a single cent in interest or fees while earning refunds and rewards.

But slip up and no doubt they'll make you sorry.

Share your credit card tips or tell your horror stories to Kara@startribune.com or 612-673-7293. Read Kara's blog: www.startribune.com/kablog.