Ugly Credit Card Trends

Here are five credit-card trends that could affect your wallet in 2007, and how to avoid getting burned.

But this scenario doesn't factor in the balance transfer fee. And while no-fee promotions were common in the past few years and balance transfer fees were generally capped at $50 or $75, such offers are getting harder to come by, says Curtis Arnold, founder of the credit card information web site CardRatings.com. Over the past few months, for example, Citibank and Bank of America have told some of their card holders they are removing the cap on balance transfer fees. The result? That $10,000 balance transfer would cost you $300 assuming a 3% fee. "For a fee to go up 300% overnight, that's mind-boggling," Arnold says. His advice: Before authorizing a balance transfer, know what you're paying. "In your offer, if there's a reference to a minimum but no reference to a maximum charge, that should tip you off," he says.

For more on balance transfers, including a calculator that tells you how the balance transfer fee affects your actual interest rate, read our story "Is That Balance Transfer Worth It?"

But as more consumers use credit cards in supermarkets, drug stores and gas stations — some of the most popular categories for bonus rewards — credit-card issuers have started pulling those offers back. Case in point: This year AmEx eliminated the double points for everyday purchases on its charge cards, while Citibank scaled back some of its most popular cards, including the Dividend Platinum Select Card from 5% cash back to 2%.

Why? Now that they got you accustomed to using plastic at the supermarket or gas station, it's on to conquering other marketplaces, says David Robertson, publisher of the Nilson Report, an industry newsletter. At the same time that AmEx scaled back its rewards for everyday spending, for example, it introduced the online Bonus Mall where card holders get double or triple bonus points for online purchases. To be sure, says Robertson, rewards programs are so successful in attracting and retaining customers that they're not going anywhere. "What's going to happen is they're going to be fine-tuned," he says.

And because running a rewards program is expensive, expect more credit-card issuers to shuffle their bonus promotions, says Rick Ferguson, editorial director of Colloquy, a loyalty marketing publisher and consultancy. Bottom line: Watch out for changes to your loyalty program, and if you don't like what they take away, look for rewards elsewhere. Keep up to date with credit card information web sites like Cardratings.com and Cardweb.com.

The appeal for consumers is clear. Using such cards could cut down the lines at places like convenience or drug stores and fast-food restaurants. And there's the "coolness" potential: Citibank, MasterCard, Nokia and Cingular just started testing technology that will let consumers shop by using their phones instead of a credit card. (In essence, you'll be able to pay by touching the special reader with your phone instead of using a credit card.) Should tests prove successful over the next months, a broader rollout is planned for 2008, according to a Citigroup executive.