Unethical Behaviors by Credit Card IssuersUnethical Behaviors by Credit Card Issuers: For quite some time now credits card issuers have been trying to game the system. In my view they have adopted strategies that while they appear to be in gray areas of ethics, if you look at the spirit of their actions they aren't really in the gray areas, they have clearly moved into unethical practices.
By their actions they have moved from being a service industry to being a parasitic industry. The single most visible tactic that credit card issuers use to increase their revenue that gives me heartburn is late fee charges. This has become such a racket that congress is in the process of setting a minimum number of day that must be allowed by these creditors for the card holders remittance to be returned to them after the bills are mailed out. Unless the minimum is at least 30 days, it won't be long enough for the majority of the population to have a reasonable expectation of turning around the remittance early enough to avoid late fees.
If you are like most people your life is fairly complicated with kids, work, and life in general. So much so that most of us can't be diligent enough to turn around payments with short turn around periods.
Let's take a look at a few of the factors that make short turnarounds difficult to deal with. First off the US mail isn't instantaneous so part of your turnaround time is automatically eaten up by the time it takes for a credit card issuer's bill to reach you and your remittance to be returned. If you take the standard rate at which the US mail is delivered across the US, you will find that it takes an average of 3 days for a first class letter to be delivered to its destination. Given this rate of travel you have automatically lost one week from the allotted turnaround time for these bills allotting three days from biller to recipient, three days back, and an additional day to account for the postal service being closed on Sunday.
There are processing delays on both ends of this process circuit that eats up part of your allotted amount of time to handle their transaction. Usually on the billers end there is usually about a one day delay. Billers add one day to the turnaround since they usually have to run computer processing batches to produce your bill, the batch is started in the evening at the end of the normal business day and then the cycle is completed in the early morning hours of the next day. This allows the biller to place the processing date on the bill as the billing date even though the bill won't be in the mail until the next day. Once the bill process begins, it usually must complete before the output is sent to the printers to create the billing packet that gets put in the mail. Once the print cycle begins, it usually takes several hours for the bills to be printed and packaged into envelops to be mailed to you. Since the bill isn't ready to go into the mail until the day after the official billing date, you have lost an additional day from your allotted turnaround time.
At the final end of the turnaround cycle you will lose additional days due to the time it takes the credit card issuer's processing to finally account for the arrival of your payment. I have found that unless you allow at least three days after your payments arrives at the card issuer for their processing to occur, your payment will be counted late. In the past I discovered this delay by talking to card issuer's customer help departments. On a few occasions in the past for one reason or another while I had been talking to credit card issuers customer service agents, I inquired about the likely hood of a payment that I had already sent or was about to send of being credited to my account prior to upcoming due dates. In all of these cases the customer service agent told me that even though the payment would arrive on time, the processing to determine the timeliness of my due payment would occur prior to my account be credited with my remittance payment. In a few of these cases the customer service agent marked my account such that I wouldn't be charged a late fee since he knew that a payment had already been made but hadn't had time to be processed. Over the years I took note of these conversations and along with keeping up with when I mailed a few payments that were counted late, I determined that I wouldn't be safe from a late fee unless I allowed at least a week for payments to arrive and be processed. Upon checking into a few of these late payments as well as some on time payments, I noticed that a number of payments had cleared through my banking account as much as three and four days prior to my credit card account showing the payments applied. This left me to wonder what the card issuers were doing from the time my payment arrived in the mail and the time the payments were credited to my credit card account. With some investigation, I found that most payments of this type go directly to a bank for processing, and many times the processing center is a separate entity from the card issuer. This is especially true of retailers that have cards issued for them. The processing center's job is to open the payments, process the checks, and credit the payments to the creditor's account. After which the processing center transfers the remaining transaction processing to the creditor. This accounts for the delay between the time payments are processed and the earlier date at which payment transactions are debited against a payer's checking account. This scenario appears to add at least three or four days to the number of days that you will lose out of the time allotted for you to turnaround payments to these creditors.
Taking into account the loss of a week for round trip mailing, one day for initial processing, and four days for creditors to reconcile payments to your account, you have lost 12 days out of the turnaround time that creditors allow to receive payment from you. Also given that some creditors are only allowing two weeks, 14 days for payments to be returned to them, the consumer may only have two days to from the time he receives his bill until he has to have a check in the mail to avoid late fees. Few credit card holders actually know how many days they have from the time they receive their statement from credit card issuers to get a payment in the mail. Given the quantity of accountable delays in the turnaround cycle from a billing cycle date until a credit card holder's account can be credited with his remittance, the allowed turnaround by a large number of credit card issuers is obviously geared to collect as many late fees as possible on the part of US credit card issuers. This also gleans of obvious unethical behavior on the part of credit card issuers.
A proper turnaround time would be in the neighborhood of around 30 days. Giving a full month from the billing date to the due date is a reasonable turnaround timeframe. I would allow for all of these delays and give a credit card holder a couple of weeks to handle his bills. This is only fair since most of us aren't sitting around waiting for the next bill we have an opportunity to process. Businesses usually do get 30 days to make their payments and they are geared such that they have a team waiting around or busily handling their transactions as quickly as they are received.
Creditors are now facing the music for many of their indiscretions towards credit card holders with the 2009 credit-card reform legislation passing critical hurdles with the House of Representatives voting 361-64 to approve a bill to protect consumers from surprise interest rate hikes, excessive fees and other practices criticized as unfair and deceptive.
There are simple measures available to you as a consumer that can allow you to protect yourself from late fees imposed by these credit issuing institutions. You as a consumer need to have an account with a bank that offers free online bill payment. The online bill payment systems currently available allow you to set up reoccurring transactions. A reoccurring transaction is one that once you set it up, you can set it to occur each month without any addition intervention by you. You then need to set up a reoccurring payment to each of the institutions who's credit cards you typically use each month. You should set this transaction up for an amount that would cover at the highest monthly payment required by your institution. I have my reoccurring transactions set up for $100 to more than cover the minimum payment for my credit cards and my minimum payment has never come close to exceeding that amount. I typically don't run a balance from month to month so my minimums are low, but yours may not be and you may need to set yours higher or lower according to your normal usage of the card. It won't hurt to set this transaction to cover a portion of your normal monthly card usage balance and after a few months you may easily have saved yourself a hundred or more dollars in late fees considering that many of the late fees are in the range of 29 to 39 dollars each.
You should also limit your normal credit card usage to a single credit card if possible. This minimizes the number of occurrences that could trigger a late fee since, for the cards that you have a zero balance on and have no transactions during the month, you have eliminated the possibility of late fees. It also allows you to minimize the number of automatic payments that you will need to set up to cover these payments, and makes it easier to determine how high you should set your reoccurring payments. It is easier to determine amounts for one or two payments than it is to determine amounts to distribute across four or five reoccurring credit card payments.
With my accounts protected from late fees, I can relax and handle these remittances payments on my schedule rather than a on my creditors schedule. I can, at my convenience, schedule an additional payment to cover the remaining balance on my account without worry of being hit with late payment fees.
I implore you as a consumer to take this action to protect yourself today.