AKAMAI MONEY

By Deborah Adamson

If you're like most people, you automatically throw out any paperwork that comes with your monthly credit card bill. Bad idea.

Ignoring what's in those extra pages could cost you thousands of dollars more in interest, fees and charges a year.

"Credit card companies can do whatever the credit card agreement states and credit agreements can change at any time. Their only obligation is to notify the credit card holders that the agreement has changed," said Ron Wall, author of "You and Your Money" and an extension specialist in family economics at the University of Hawai'i-Manoa.

Changes could include shorter grace periods, higher annual percentage rates (APR), new fees or stricter terms. The APR reflects the interest rate assessed on your debt, plus certain charges and fees.

In Hawai'i, two Senate committees passed a bill that would erase the current 18 percent cap on credit card APRs. That means local financial institutions that issue credit cards could soon be allowed to charge fees as high as the market would bear.

However, local firms only have about 10 percent of the Hawai'i market. The rest is held by out-of-state issuers.

The 10 largest credit card issuers in the country are JPMorgan Chase, Citibank, MBNA, Bank of America, Capital One, Discover, American Express, HSBC, Providian and Wells Fargo, according to research firm CardWeb.com in Frederick, Md. Together, they control 85 percent of the U.S. market. The top three issuers alone command a 65 percent market share.

Banks and other credit card issuers make a lot of money from fees. Last year, Americans paid more than $24 billion on just three types of credit card fees, up 18 percent from 2003, according to CardWeb.com. Penalty fees — for late payments and going over the credit limit — take up the largest share at $14.8 billion. Cash advance fees are second with $6.1 billion while annual fees are third with $3.5 billion.

So pay attention to changes, especially if it's your APR.

"If you save $1,000 by reading the fine print, it's really worth the effort," said Scott Bilker, author of "Talk Your Way Out Of Credit Card Debt" and founder of DebtSmart.com in Barnegat, N.J.

Let's say your credit card company notifies you that it's hiking your APR from 6.99 percent to 11.99 percent due to rising short-term interest rates. If you keep a balance of $5,000 and make the minimum monthly payment of $100 without adding new purchases, at 11.99 percent it would take you nearly six years to pay off your debt at a total cost of almost $7,000.

If you read the notice, called to negotiate a lower rate and got 7.75 percent because you're considering closing your account, you would be debt-free in five years at a cost of just over $6,000. Your savings from paying attention: about $1,000.

In a competitive credit card industry, "you can negotiate anything," Bilker said.

Keep an eye out for these changes on your credit card agreement:

• Universal default — If you're late on one bill, such as your electric bill, your credit card APR might go up as well. In a practice called "universal default," credit card issuers monitor your credit rating to see if you're becoming more of a credit risk.

"They can raise your rate to whatever they want within the law where that credit issuer operates," Wall said. "It might go from 12 percent to 24 percent."

Sometimes, a credit card company can jack up your APR even if you don't make a late payment but you've begun to charge more on your cards. They see you piling up debt and see you as a bigger credit risk, said Linda Sherry, editorial director at San Francisco-based Consumer Action.

• Bait-and-switch — You might get a credit card offer in the mail with a low APR, but that's not a guarantee you'll get it. If you apply for it but don't get approved, the credit card company could send you another card you qualify for, usually at worse terms.

"Even if you're given a pre-approved offer, this can still happen if your credit rating has changed," Sherry said.

• Stricter late payment policies — Many credit card issuers now are specifying a time when they must receive your payment, such as 1 p.m. Eastern time. If you're even five minutes late, you'll be charged a fee. The Consumer Action survey said 58 percent of banks have a cut-off time for late payments on the due date.

• Higher late-payment fees — The highest late fee found in 2004 was $39, the survey said. Four of the nation's top 10 issuers charged $39 while the other six assessed $35, according to CardWeb.com.

If you're late on a payment, your APR will most likely go up, as well. In the Consumer Action survey, 85 percent of credit card companies will charge a higher APR rate on late payers. The average penalty rate was 22.91 percent, up 1.38 percentage points from 2003.

A third of issuers that charged penalty rates said just one late payment can trigger a higher APR while 35 percent said it would take two late payments in back-to-back months or within a six-month period.

• Rewards disappear — Another consequence of late payments is that your card company might be able to cancel any airline mileage or points you've accrued. It could take a fee to reinstate them, or they can be permanently erased. Going over your credit limit also could invalidate your rewards.

• Cash advance APR — Cash advances result in a higher APR. Those checks you received from your credit card company? They're most likely for cash advances.

• Over-limit fees — These are fees you incur by going over the credit limit. But since credit card companies set the limit, how can you go over it?

Here's how: let's say you're close to maxing out your credit card. A finance charge for carrying a balance could push you over the limit. Another way you can go over is when the credit card company approves transactions above the limit, Sherry said.

About 95 percent of issuers surveyed have over-limit fees ranging from $10 to $39, according to Consumer Action.

• Lower minimums required — More cards are requiring lower monthly minimum payments. The Consumer Action survey showed that 53 percent of issuers required consumers to pay 2 percent of the monthly balance each month while the rest were higher. In the 2003, 43 percent asked for 2 percent. A potential consequence? It makes racking up debt easier and making full repayment longer.

Got a personal finance or consumer question? Contact Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.