Credit Card Users Will Soon Pay Highest Rates in Five Years

Credit card rates will soon be at the highest rate in five years. The Federal Reserve has just
increased the federal funds rate for the 15th time since January 2004. Banks wasted no time in
raising the Prime Rate from 7.5% to 7.75%. This will quickly affect any household that has an
outstanding credit card balance.

For example, a credit card like Chase that currently charges 3.99% plus the prime rate for a premium
card will increase from 11.49% to 11.74%. Default rates continue to climb higher and higher. The
new default rate for many cards will be around 31.74%.

The Federal Reserve implied that rate hikes will not stop here and analysts expect another increase
in May. This is difficult news for many households because their debts and outstanding balances are
increasing and their income has barely increased. According to a recent Federal Reserve survey,
46.2% of all families now carry a credit card balance. This is up from 44.4% in 2001. Households are
also carrying higher balances; the mean balance is now $5,100 ($4,400 in 2001) and the median
balance is $2,200 ($2,000 in 2001). The median income is now $43,200, up a tiny 1.6% from 2001. The
typical family's credit card balance is now almost 5% of their annual income.

"Households no longer have the luxury of very low rates and they need to have the wake up call that
those days are over. Rates are at a 5-year high and will continue to increase. It is time to get rid
of the credit card debt or it will continue to drain away more of an income that is not keeping up,"
says Bill Hardekopf, CEO of Lowcards.com.

If the cardholder has a good credit score and payment history, they don't have to just accept the
rate increases as concrete and irreversible. Many users who carry a balance should contact their
credit card company and ask for a lower rate. Requesting a lower rate is pretty simple, even if
negotiating seems out of the comfort zone.

"Just call the number on the back of the credit card or bill and tell them that you have been a good
customer and you would like a lower rate. Tell them you have received several offers with lower
rates in the mail and have researched cards with lower rates online. You want a lower rate on your
card or you will switch to another card with a lower rate--what can they do to help you out?" says
Hardekopf.

If the first person you talk with says they can't lower your rate, try again in a week or a month
and talk with someone else who may be more cooperative. This is a case where persistence can pay
dividends. If you are turned down several times but feel you have a good case, talk with a
supervisor.

"If you have a balance that is well below your credit limit and you have a good payment history,
then you have a good chance of getting a lower rate," says Hardekopf. "You should also call to
negotiate a lower rate if you have a high rate but have built a good credit history and increased
your credit score over the past 12-18 months."

If the credit card company does not offer a lower rate, then it may be time to look for another
card.

"The goal is to have a card with the lowest rate possible that meets your needs and keep the card. A
long history with your credit card is good for your credit score and gives you power to ask for
lower rates or to waive an occasional late payment fee," says Hardekopf.

Qualifying Military Families Can Receive 6% Interest Rates for Credit Cards and Loans

Qualifying Military Families can Receive 6% Interest Rates for Credit Cards and Loans

Many military families struggle to make ends meet when family members are called into
active duty. To help these families stay afloat while making huge sacrifices, the Servicemembers
Civil Relief Act requires most creditors such as credit card issuers and mortgage lenders to cap
interest rates at 6% on pre-service debt for active service members. The portion above 6% is
permanently forgiven.

The Servicemembers Civil Relief Act applies if the servicemember takes a pay cut to fulfill the
military obligation which materially affects the ability to pay debts and obligations. The purpose
is to suspend or postpone some civil obligations so that the military member can devote his or her
full attention to military duties. This helps ease the financial strain and allows the family to
still be able to pay bills such as credit card, mortgage and loans. The debt must have been incurred
before he/she was called into active duty. The standard rates will apply if the credit card or loan
was applied for after the call for active duty.

"Military families make so many sacrifices and many make less then they can earn as a civilian.
Expenses can quickly exceed income and add to the stress. Taking advantage of the 6% rate for all
eligible loans can help prevent problems with debt," says Bill Hardekopf, CEO of LowCards.com.
"However, the creditors are not checking to see if you have a family member currently serving and
then charitably lower your rates. You have to contact them and make it happen."

To get the interest rate cap, provide the creditor with a notice of military order calling for
military service. After the creditor receives the notice, it must lower the rate to a maximum of 6%.
It must be effective the first day of active duty and is retroactive if received late. The monthly
payment must also be reduced by the amount of interest saved during the covered period.

Every military family should find out if they qualify, then check their loans and credit cards to
take advantage of the lower rates. However, receiving the lower rate is not automatic. To request
the lower rate, send the creditor a letter with a copy of the active duty orders and ask for an
immediate confirmation. If the servicemember qualifies, the creditor must lower the rate unless it
goes to court. In court it is up to the creditor, not the servicemember, to prove the ability to pay
has not been affected.

Reservists and members of the National Guard (when in active federal service) are included under
SSCRA.

There are also special allowances for income tax payments, rental agreements and protection from
eviction. Insurers may not decrease or restrict the amount of coverage, or require increased
premiums if the member enters active duty. Servicemembers should talk to their Legal Assistance
Attorney or accountant to learn about all of the benefits they may qualify for. Agents of the U.S.
Treasury and tax lawyers can also help families find the help and exemptions that apply.

LowCards.com ( http://www.lowcards.com ) is an independent website that helps consumers easily
compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest
intro rates. It also gives an unbiased ranking and review for each card. Created by Hampton &
Associates, the company has been analyzing the credit card industry and supplying objective websites
on various consumer expenses for over five years.

For more information, contact Bill Hardekopf at 1-800-388-1910 or billh@LowCards.com.

Call and Ask for a Lower Credit Card Rate

It never hurts to call and ask for a lower interest rate and saving money on interest is certainly worth the effort. The credit card industry is very competitive and if you are a good customer, they want to keep your account. However, they aren't going to just lower your rate as a gift to a good customer, you have to make the call and possibly several calls to get a lower rate.

Requesting a lower rate is pretty simple, even if you don't like negotiating and this seems out of your comfort zone. All you have to do is call the number on the back of your credit card or bill. Tell them your name and that you have been a good customer but you would like a lower rate. You have received several offers with lower rates in the mail and have researched cards with lower rates online. You want a lower rate on your card or you will switch to another card with a lower rate- what can they do to help you out?

If the first person you talk with tells you they can't lower your rate, try again in a week or a month and talk with someone else who may be more cooperative- this is a case where persistence helps. If you are turned down several times but feel you have a good case, talk with a supervisor.

When should you ask for a lower rate?

-The average APR is around 14.9%. If you have a good payment history and your APR is over 12%, call and ask for a lower rate.

-If you received a high rate for your first credit card but have paid on-time and your balance has been less than half of your credit limit for 6-12 months, call and ask for a lower rate.

-If your card started out with a low rate, but it has increased several times, call and ask for a lower rate.

-If you received a default rate or very high rate, but have built a good payment history and improved your credit score, call and ask for a lower rate. Not sure why your rate jumped to the default rate, call and ask for an explanation and a lower rate.

-If you have had the same card for several years, your balance is under 30% of your credit limit and you have been satisfied with your rate, call and ask for a lower rate. You may be surprised that you can get a lower rate.

What difference will it make? Here is an example. If your balance is $5,100 you will pay $760 in interest per year if your APR is 15%. If your rate is 11%, you will pay $560. That saves $200 per year- you can save even more by applying that $200 to pay down your balance.

Not everyone who asks will receive a lower rate; newer customers with high balances may be turned down, but it never hurts to ask. The goal is to have a card with a low rate that meets your needs and keep it. A long history with your credit card is good for your credit score and gives you power to ask for lower rates or waiving the occasional late payment fee.

Avoid Paying Taxes With Credit Cards--Use Tax Refunds to Pay off Credit Cards Instead

It is a few short weeks until April 17 and the last minute rush to pay income taxes. In 2005, 1.5 million taxpayers paid their taxes with plastic and the number is expected to increase in 2006. While convenience and rewards are appealing, they are not free; taxpayers using a credit card will be assessed a fee of 2.49% of their payment.

"The IRS allows credit card payments and the payment centers and credit issuers advertise it, but that does not mean paying with plastic is a good idea for consumers." says Bill Hardekopf, CEO of LowCards.com. "Even with double reward points, the reward is usually not worth the money thrown away with the fee."

Extra Reward Points are not Worth The Fee
According to Rea Hederman, Senior Policy Analyst at the Heritage Foundation, the estimated 2005 individual income tax paid per household will be $8,045. "Based on this figure, the average household will pay $200 in extra fees if they use a credit card to pay their taxes. That $200 could almost buy a plane ticket," says Hardekopf.

A few cards offer double points for tax payments. Starwood Preferred Guest Card from American Express doubles Starpoints but the limit is 5,000 points per card. Pay with the American Express Delta SkyMiles card and receive 2 miles per $1 spent on federal taxes; the cap is 100,000 miles, depending on the card level. To receive the bonus offers from American Express, taxes must be paid by April 17, 2006. The United Mileage Plus SignatureVisa card from Chase is a better deal because it does not put a limit on rewards for paying taxes through December 2006.

"Even with double rewards, these cards aren't good choices for a credit card. They have high interest rates of over 17%. The airline cards also have high annual fees--the Gold Delta SkyMiles annual fee is $85, the United Visa annual fee is $60," says Hardekopf.

Any balance incurred by paying taxes with a credit card should be paid in full as soon as it arrives. A late payment or default interest rate on a larger balance like this could create a serious financial setback. "Do not pay your taxes with your credit card if you will carry a balance. If you charge the average tax of $8,045 to your credit card with a 13% APR and pay it off in one year, you will pay an extra $1,040 in interest, plus the $200 in fees," says Hardekopf. "If you only pay the minimum balance each month, it will take 264 months (22 years) to pay off your taxes. You will pay $5,973 in interest."

Verify Your Card Terms Before Charging Your Taxes
Don't assume that your card will double the rewards for tax payments because few actually do. The issuer may even treat the payment as a cash advance with a higher fee and interest rate. Before calling the IRS payment center with credit card in hand, call the issuer and verify how the rewards apply to tax payments and to make sure it is handled as a purchase, not a cash advance.

Paying with a credit card is appealing because it easy to make a phone call and pay the amount you owe with a credit card. Credit cards also offer protection against error. If making the payment by credit card, call one of the IRS payment centers; do not forward the credit card into the IRS and do not write the credit card number on the tax form.

Best Plan for Taxes and Credit Cards
Instead of using credit cards to pay taxes, households should use tax refunds to pay off credit cards or other debts. "For households with a balance that is creeping up, cash from refunds is a great chance to reduce your debt and the amount you are paying in interest each month," says Hardekopf. "That is the best way to involve your credit card at tax time."

Should You Get a Secured Credit Card?

Secured cards are for those who have no credit or a bad credit history and can't get a traditional credit card. This card can also be an option for those who have a completed bankruptcy. Consider a secured card as a short-term band-aid to repair your credit. If used correctly, a good payment history with the secured card should improve your credit score enough that you will qualify for a standard card in 12 months to 2 years.

The secured card looks like a traditional credit card- the merchant will not know it is a secured card. The difference between the secured and unsecured card is the higher rate and fees for the secured card. The credit limit for the secured card is determined by the deposit.

The credit limit is based on the deposit. If your deposit is $300, you will receive a Mastercard or Visa with a credit limit up to $300. The security deposit is not used to pay for charges but to cover the balance if the account is closed. The deposit is held until the account is closed. The deposit is not applied toward payment on the balance; you must make the monthly payments on the card or the bank will turn the account over to collections. This will damage your credit score even more.

The bank is willing to offer this form of credit because it receives a security deposit and keeps it as long as the card is open. The bank is safe because it will just keep the deposit if the bill is not paid and does not lose any money.

There are fewer requirements for a secured card: you must have a telephone in your home; reside in the US and have a valid Social Security Number. While many applications are accepted, you are not guaranteed to receive a card. Unpaid tax liens or undischarged bankruptcies may prevent you from getting the card. Some issuers will not offer a card if there is a past bankruptcy.

Pay your bill on time and you will typically be upgraded to an unsecured card in about 18 months. Some cards may also increase the credit limit to more than your deposit. After 12 months of good payment history, start contacting the issuer about converting your card to an unsecured card with a lower rate and a deposit refund. After 2 years of good payment history, you should qualify for traditional credit cards.

Your available credit may also be limited, from time to time, if you give your account number or card to a merchant that processes advance authorizations, such as a hotel, motel or car rental office. Such an authorization may limit your ability to make purchases and take cash advances on your account until the authorization is cancelled by the merchant and your available credit released.

Make sure that the secured card you are applying for reports to the credit bureaus. This is necessary to start rebuilding your credit history. If the card doesn't report your history, a good payment record will not affect your credit score. Some cards require an additional fee for this- save yourself some money and choose one that doesn't require this fee but still reports.

Orchard Bank Mastercard Classic is a good choice if you will pay off your balance each month. The opening fee is a little high compared to other cards but it does report to all 3 credit bureaus.

Here is a comparison of cards for people with poor credit.

TheDenverChannel.com Recommends the LowCards.com Forum

CNBC Interviews LowCards.com CEO Bill Hardekopf

Bill Hardekopf, CEO of LowCards.com, was interviewed during "Street Signs" at 2:50 EST on CNBC on Monday, March 13. The topic of the interview was the increase in minimum payments required by credit card companies. The interview was in response to the article mentioned below and written by Joe Bel Bruno of the Associated Press.

AP/ Business Week Mentions LowCards: Minimum Payments Might Dent Bank Profits

NEW YORK — Making the minimum payment on your credit card bill might not be as easy as it used to be _ and two of the nation's largest banks say their own finances might suffer as a result.

Both Citigroup Inc. and JPMorgan Chase & Co. said in recent filings with the Securities and Exchange Commission that delinquencies and charge-offs might spike in the second half of the year. That's when the banks believe new federal guidelines that require significantly increased monthly minimum payments will begin to hurt customers already struggling to pay bills.

The new requirements imposed by the Office of the Comptroller of the Currency _ which regulates banks and some credit card companies _ are designed to help customers avoid getting deeper into debt. However, a new spate of defaults as customers adjust to the new minimums could hurt profit at the nation's card issuers _ especially those that cater to borrowers with weaker credit.

"Banks will not only have increased losses, but reduced revenue as well," said Lehman Brothers analyst Jason Goldberg. "For some customers, the banks will have to reduce interest payments in order to keep them from defaulting. There's a bit of uncertainty because it's hard to predict human behavior."

Banks have instituted the new minimum balances at a time when American families continue to reel from credit card debt. The Federal Reserve said last month in its survey of consumer finances that 46.2 percent of all families now carry a credit card balance _ up from 44.4 percent in 2001.

Meanwhile, consumers are also carrying higher balances _ with the mean balance growing to $5,100 from $4,400 in 2001, according to the report. The median income is currently $43,200 and the typical family's credit card balance is now almost 5 percent of their annual income, according the Fed said.

The new guidelines require credit card issuers to charge an amount that includes not just the outstanding fees and finance charges, but at least 1 percent of the principal owed. This could cost JPMorgan and Citigroup each about $500 million of losses and lost revenue this year, Goldberg said.

Citigroup, the nation's largest financial institution with about $120.32 billion in revenue last year, has more than 130 million credit card accounts. The majority of its card holders pay more than the minimum due, but the bank didn't have a specific breakdown available, according to Citigroup spokesman Samuel Wang.

At JPMorgan, which has more than 110 million credit card accounts and posted about $80 billion of revenue last year, customers were required to make the new minimum requirements at the end of 2005. Prior to the change, about 10 percent of its overall customers were making only the minimum payment, said JPMorgan spokesman Paul Hartwick.

Bill Hardekopf, chief executive of credit card Web site www.Lowcards.com, said many of the credit card companies will be affected as consumers move to consolidate their cards.

He believes most consumers will get over the "sticker shock" of being forced to make higher payments, and the amount of defaults will lessen as months go by.

"The new minimums could be very beneficial to credit card companies because they'll get their money quicker, but it could become very expensive if it has the effect of driving more consumers into bankruptcy," he said. "It's too early to tell, but this won't hurt the big boys as much as it will hurt the subprime lenders."

Subprime lenders have a higher incidence of charge-offs and delinquencies, and charge customers higher interest rates because they are deemed less credit worthy. Some of the bigger public companies that have large subprime businesses include issuers such as Capital One Corp. and Providian Financial Corp.

The actual impact of the new minimum payments won't be known for a few quarters, analysts said. In fact, JPMorgan said in its filing with the SEC that it expects the first six months of the year to see sharply fewer bankruptcies as a result of new laws that went into effect.

Credit card companies were besieged by losses stemming from a surge in consumer bankruptcies in the fourth quarter. Banks reported a sharp increase in loan charge-offs amid a rush of consumer bankruptcy filings prior to the Oct. 17 change in the nation's bankruptcy law, which made it more difficult for consumers to discharge their debts.

The Birmingham News mentions LowCards.com : Credit card balances on rise, study says

Credit card balances on rise, study says
Average family pays $700 a year in interest
Friday, March 03, 2006
ROY L. WILLIAMS
News staff writer
A survey released Thursday by a Birmingham firm says more families are carrying balances on their credit cards - and the amount they owe is rising to eat up a bigger chunk of a typical family's income.

LowCards.com says 46.2 percent of U.S. families now carry a balance on their credit cards, up from 44.4 percent in 2001. Households also are carrying higher levels of card debt, with an average balance of $5,100, compared to $4,400 five years ago. The median balance is $2,200, up $200 in five years.

LowCards.com, which operates a Web site allowing consumers to compare credit cards, studied Federal Reserve data in preparing its survey.

The study found a typical family's credit card balance is now 5 percent of the annual median family income of $43,200, said Bill Hardekopf of Birmingham's Hampton & Associates, which started LowCards.com six years ago.

Hardekopf said the average household is now paying more than $700 per year in interest on credit cards.

"These households have probably gone through budget shock - as their balances have risen, the interest rates have also increased every few months and the minimum payment percentage has just increased," Hardekopf said. "The average APR (annual percentage rate) is now above 13 percent, so carrying that balance is getting very expensive."

Paying more than the minimum balance due - even just an additional $20 per month - makes a big difference in paring down credit card debt, Hardekopf says. Paying off a $2,200 balance with a 13 percent APR and $55 minimum payment will take more than 14 years and cost an additional $1,500 in interest.

"Increase the monthly payment to $75 and it will take only 36 months to pay off the card and only $461 in interest," Hardekopf said.

Reducing or eliminating credit card debt should be a priority for families who want to move beyond mere financial survival, he said. Another option is transferring your balance to a card with a lower interest rate.

The survey is not a discouraging picture for all families. While 74.9 percent of all families have a credit card, 42 percent of them pay off their card balances each month. "Every person who pays off their credit card in full each month should be using a credit card that gives a rebate or a reward," Hardekopf said.

Hardekopf has been involved in several business ventures in Birmingham and is remembered as the former president of the Birmingham Barons minor league baseball team.

Raising Your Credit Score--Same Rules Apply with the New Scoring System

Raising Your Credit Score--Same Rules Apply with the New Scoring System

The big three credit reporting agencies announced yesterday that they had created a new credit scoring system called VantageScore that will reportedly make credit scores more accurate.

Bill Hardekopf, CEO of LowCards.com, wonders if these agencies introduced this new system for another reason.

"This appears to be a new way for these credit agencies to generate revenue. These agencies used to have two revenue streams--the credit report and the credit score. The Federal Government made these agencies start giving the credit reports away for free and thus, took away a significant portion of their revenue. Now, these agencies need to convince consumers that they should pay to see their credit score. By working together and offering a consistent score, these agencies have generated a tremendous amount of publicity and tweaked the consumers' interest in credit scores. It looks like the three credit reporting agencies have come up with a way to recapture some of their lost revenue."

The new scoring system will take a few months to take effect. Hardekopf says the key for consumers is to raise their credit score, no matter which scoring system is in place.

"The same rules still apply for getting a good credit score and keeping it," says Hardekopf. "Consumers can save a significant amount of money by making sure they
follow some basic rules."

Some of the suggestions from LowCards.com for getting a good credit score are:

-Carrying a lot of debt will pull your score down. Creditors view you as a risk of default if you are at the limit with your credit cards. Pay down your balances so that your debt ratio will be small or pay them off altogether. If it will take a while to pay down your debt, then try to increase your credit limits which will also bring the debt ratio down. Just be careful not to use this as an excuse to charge more.

-If you have a good credit card, keep it. Keeping a card and building a good payment history helps build your credit score. Creditors want you to have a long, dependable credit history. Even if you have had problems in the past, get current and stay current now.

-If you are just getting started, don't open a lot of new accounts because they will lower your average account age. This has a larger effect on your score than if you don't have a lot of other credit information. Fast account buildup looks risky if you don't have an established history.

-Having another loan like a car loan that you pay on time each month will also help build your score. Get into the habit of paying all bills including mortgage and utilities before the due date.

-Get a checking and savings account.

-Avoid filing bankruptcy if possible. This is the most destructive action you can make with your credit score and remains on your record for at least seven years.

-Stay current with child support payments.

-Avoid co-signing for loans. If they don't pay or go into default, you are responsible.

-Limit your response to credit card offers. Even if you don't get the card, just responding to the offer shows up on your credit history because the credit card company pulls a copy of your credit report. This creates a red flag for creditors if there are more than four or five of these during a six month period. However, your score is not affected by multiple inquiries for auto loans or mortgages. These are usually treated as a single inquiry

-If you have bad credit or are re-building your credit, the only card you may qualify for is a secured card. If you do get one of these, make sure it reports to the credit bureaus- you may have to pay an additional fee for this. Read the terms and conditions to find this out. Here is a comparison of secured cards.
http://www.lowcards.com/poorcredit.asp

-Monitor your credit report. By law you can now receive one free credit report from each of the three credit reporting agencies (Equifax, Experian, TransUnion) each year. Use this to make sure all of the information in your credit report is accurate. Unfortunately, mistakes do appear and it can hurt your score if you don't catch it and correct it. You have the legal right to ask them to fix mistakes. The credit bureaus have 30 days to check the error and correct it. The must delete the information if they can't verify it.

The good news is that even if you have had problems in the past, credit scores can be improved over time.

LowCards.com (http://www.lowcards.com) is an independent website that helps consumers compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. Created by Hampton & Associates, the company has been analyzing the credit cards and supplying objective websites on various consumer expenses for five years.

No-Fee Credit Cards

Several companies have now started issuing no-fee cards. They sound good: No annual fee, no late fee, no cash advance fee, no balance transfer fee. Keep in mind that credit card issuers make much of their money off fees and the same principle applies to this card, it is just promoted a little differently.

In most circumstances this type of card is not the best choice. If you pay your card off each month and never pay any fees, then a reward card is a better choice for you. If you carry a balance, but have a payment schedule and pay on time every month, then get a card with a lower rate- no fee cards typically have a higher APR than most other cards.

If you have paid late fees, over the limit fees, or cash advance fees in the past 2 years, then this card still may not be a good choice. This card makes it too easy to miss a payment and not worry about the consequences. Even though there is no fee for the first late payment or going over the limit, it will be reported to the credit bureau. If it happens again in 12 months, you will also be hit with a high default rate- about 30%- for at least 12 months.

This card only benefits someone if they have accidentally miss a payment once in several years. However, even if this is helpful once and may save you a few dollars, there are better choices for credit cards. Select a card with a lower rate or better rewards, and if you do occasionally have a late payment, or go over the limit, just contact the credit card company- many times they will waive the fee.

Chances are if you expect to have a few fees and think you need this card as protection, then you are more likely to end up in default with the higher payments. This type card is not a safety net to help you if you are on the edge and having trouble paying your bill each month.

Washington Post mentions LowCards.com

Time Out on Cash Back
Credit Card's 5 Percent Rebate Is Slow to Add Up

By Don Oldenburg
Washington Post Staff Writer
Sunday, March 5, 2006; Page F05

Marta Vogel is perplexed -- as many of us are. Credit card confusion seems to be the norm these days, whether it's understanding how your interest rate suddenly quadrupled, figuring out why your on-time payment got socked with a late fee, or wondering why a card's selling points aren't all they were cracked up to be. Not a lot of clarity in credit cards.

About six months ago, Vogel, a Bethesda resident, saw an ad for the AT&T Universal Cash Rewards Card. It's a cash-rebate card that pays back to cardholders a small percentage of almost everything they charge on it. Like any smart consumer who recognizes there's a reason her credit cards are a bit beat up, Vogel decided the offer was too good to pass up.

The advertisement promised a "5 percent cash rebate" on eligible purchases at gas stations, supermarkets and drugstores. One percent back on everything else. Total rebates up to $300 per year. No annual fee.

Hey, with the price of gasoline alone, that's a no-brainer!

"Five percent cash back -- those are exactly the words on the card," said Vogel. "So I started using my card for gas and groceries."

But somewhere between the seafood aisle at Trader Joe's and credit card headquarters in South Dakota, something didn't add up. Vogel spent $245 that first month on eligible products but her rebate came to $2.45. One percent. Vogel called the AT&T card's toll-free number several times and eventually was told to send a copy of the ad that said she's supposed to get 5 percent and they'll investigate. (Wait just a minute. They have her account number, right? They can't confirm the terms of the credit card? Are they on Mars or what?)

She called again and was told her card pays a 1 percent rebate on eligible purchases and a 4 percent bonus shows up in two or three billing cycles. "I saw nothing indicating the 4 percent comes later in their literature," she fumed. "I should get 5 percent. This card and its benefits are advertised all over the place. It is no secret."

Enter the Consummate Consumer. After weeks of investigation, Samuel Wang, spokesman for Citigroup, which operates the AT&T Universal Cash Rewards Card program, had an answer: "We did identify [Vogel] was not enrolled properly. We have made her whole, and she was credited the amount as far as the rate gap is concerned."

Meaning everything was squared away. "It is something that we apologize for," said Wang, adding that Vogel would get a $50 courtesy credit for her troubles.

But come late January, Vogel's statement again didn't jibe. It was back to 1 percent now, 4 percent later.

Curtis Arnold, founder of CardRatings.com, an independent consumer resource on credit cards, said in cases like this, "more often than not, the consumer is confused or doesn't understand where to get that 5 percent rebate -- because it's not every grocery purchase you make. Typically if you go to a Wal-Mart or a wholesale club, that isn't included."

No wonder people get confused! One CardRatings.com board member reverted to using a spreadsheet to make sure he was getting the correct rebates, said Arnold. "It can be very hard to track."

And, then, credit card companies "do make mistakes," he said, adding that Vogel's complaint is a common one he hears from consumers.

He thinks maybe the delay in posting the full 5 percent relates to the fact that rebate money held back a couple of billing cycles earns big interest for you-know-who. "I see no justification for the delay . . . especially a delay of two to three months," he said. "You can rest assured that it doesn't take Citibank two to three months to collect its fees from the merchants."

John Oldshue, owner of LowCards.com, a credit card comparison Web site based in Birmingham, says Vogel's complaint reflects bigger credit card industry problems.

"With credit cards, you are getting almost the same amount of legal wording you get with a mortgage . . . but nobody's reading them and nobody's explaining them," says Oldshue.

Never mind that signing up for a credit card constitutes a legal contract to borrow money and accept a loan that could reach thousands of dollars and cost exorbitant interest rates. Or that the issuer can change the deal any time it wants-- as long as it gives you a 30-day warning (see the AT&T Universal Card fine print: "We may revise any of these AT&T Universal Cash Rewards Card Terms and Conditions at any time with 30 days prior written notice").

Why? Because it works: The credit card industry took in pre-tax profits of $35.6 billion last year, according to R.K. Hammer, a credit card industry advisory firm -- up 6 percent from 2004 and more than 15 percent from 2001.

"People often don't understand what they are getting into," says Oldshue. "There's an epidemic of problems [like that] with credit cards."

Most notably, something called "universal default penalty rates." Credit card companies have forever been charging late fees and incrementally raising the interest rates of cardholders who make late payments -- a policy considered fair enough. But now they're scouring cardholders' credit reports in search of slip-ups, a single late payment, totally unrelated to the credit card account -- and then they use it as an excuse to label the cardholder a "risk" and jack up his interest rate to unconscionable levels.

"That really ticks people off," says Oldshue. "We're a society that is ruled by contracts, and consumers sometimes don't realize that. Businesses go into [a deal] doing these flowery promotions -- but the devil's in the details. As painful as it can be, you have got to read the agreement and understand what you are getting into."

In its credit card study released in July, Consumer Action examined 146 cards from 47 issuers to identify why and how banks imposed universal default penalty rates. The San Francisco nonprofit consumer-education and advocacy group found that 45 percent of banks surveyed charged universal default penalties for arbitrary reasons, such as late payments, a drop in credit score, too much debt or a new credit card.

"The bottom line is, don't pay anything late," says Consumer Action's director of national priorities, Linda Sherry, who coordinated the survey. "That starts the domino effect going, and you can be dead meat! You could even end up with a credit card at close to 30 percent interest rate."

These questionable practices are gradually getting attention from lawmakers and federal banking regulators. Recently, regulators provided new guidelines to credit card companies for increasing cardholders' minimum monthly payments so cardholders can escape the pay-forever Catch-22. And the Federal Reserve Board supposedly is considering revisions that would clarify credit card disclosures. And in Congress, a House bill called "The Consumer Credit Card Protection Act" would prohibit arbitrary universal default penalties. Another bill, "The Loan Shark Prevention Act," would establish a fair cap on credit card interest rates.

Meanwhile, Vogel's complaint and similar feedback from other cardholders has convinced Citigroup that just maybe the terms of the AT&T Universal card's rebate program and billing statement aren't clear enough. "We are going to undertake a statement redesign to make these matters more clear," Wang says.

Cardratings.com founder Arnold is skeptical: "Remains to be seen if it will actually be clearer," he says, "and whether it will help."