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Sidestep credit card fees

Consumers may soon have more protection from the credit card industry. In the meantime, Gerri Willis looks at how to minimize fees and penalties.

By Gerri Willis, CNN

NEW YORK ( -- A senate panel is scrutinizing the fees and billing practices of the credit card industry. The good news is that reform may be on the way. But we'll give you the tools you need to protect yourself now from credit card fees.

1: Avoid universal default

Universal default is one of most controversial practices by credit card companies because it allows your issuer to raise interest rates on cards as high as 35 percent if you are late paying any other bills such as your car payment.
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But it may be on its way out. In fact, Citigroup announced recently it was abandoning the practice. As a consumer, it's very difficult to know if your card carries a universal default clause. But with a little bit of research, you can avoid cards that are notorious for universal default.

For a list of cards that practice universal default, go to

You can also check your cardholder agreement by looking at the area that mentions "default pricing." If that section indicates your default pricing is based on any information in your credit report, that's a red flag your card issuer has a universal default policy.

2: Forget double-billing

Double billing happens when the credit card company charges interest on your entire purchase even if you've already paid part of it off. So you wind up paying interest on the sum of the average daily balances for the current and previous billing periods. The people who are most vulnerable to this are those who sometimes carry a balance on their cards.

To avoid double (or two-cycle) billing, make sure your bank calculates your finance charge on one billing cycle only, says Curtis Arnold of Look for the phrase "average daily balance" on your credit card agreement.

Recently Chase announced it would end this practice and start charging interest on a customer's average daily balance for just one billing cycle.

3: Work around late fees

Lawmakers continue to challenge credit card execs over rising late fees and other dubious penalties and practices. Right now most credit card issuers charge late fees in excess of $30 and penalty interest rates can top 30 percent in some cases.

To avoid these fees, automate your payments online. You can even set up your payments months in advance. But, if you know your payment is going to be late, you may be able to avoid a late payment fee if you call ahead. Credit card companies may give you a break in some circumstances.

4: Transfer with caution

We've all gotten those ads for zero-percent balance transfer fees. And while transferring a high credit card balance to a card with lower rates can be a great move, it's becoming more and more expensive.

It used to be that balance-transfer fees were capped at $75 or so. But more often credit card companies are getting rid of caps on balance transfer fees or increasing the fees, says Arnold of

For example, if you're transferring $10,000 to a card with a lower interest rate, and that fee is 3 percent, that transfer will cost you $300. To find out if you may fall victim to high balance transfer fees, look at your credit card agreement. If there is a reference to a minimum fee for a balance transfer, but there's no reference to a maximum balance transfer fee, chances are, there are no limits to how much money you may be on the hook for, says Arnold.

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