What Nancy should tell the moneychangers who come to our temple.

"You lenders get the same kind of loans you gave Joe Sixpack!"

The Credit Card Sinkhole

It didn’t matter that the World Trade Center towers had just fallen or that her soldier husband was facing combat in Afghanistan or that the anthrax scare had slowed the mail. The punishment for the California resident’s late credit card payment: an interest rate increase to 27 percent, which added $300 per month in fees to an already hefty balance.

Nor did it matter when the payment of another California cardholder arrived on the due date—but after the hour his card issuer had set as a deadline. He, too, got late penalties.

Such late fees are not illegal, but they are often hidden in fine print. And if history repeats itself, 60 percent of credit card users will incur them this year—with the true cost sometimes extending far beyond the average $33 penalty. The latest punishment—known as "universal default"—allows for virtually any late payment to trigger interest hikes and additional fees on other loans.

"A year ago, I’d say the most egregious penalty was tripling your credit card interest rate for being one hour late with your credit card payment," says Heather McGhee of Demos, a New York public policy research group. "Today, with universal default, if you’re late paying your credit card bill, your insurance, mortgage or car loan rates can also increase." More...

http://bulletin.aarp.org/yourmoney/personalfinance/articles/cc_sinkhole.html