Just when it seemed that interest rates on credit cards might be falling out of the stratosphere, a non-profit association of cardholders is releasing a report saying that a "complex maze of secret billing tactics and fees" are hiking effective rates above 30 percent in many instances.
The study, to be released today by Bankcard Holders of America, cites tactics that it says disguise the true rates being charged many American cardholders, 72 percent of whom have outstanding balances.
Among the tactics are one-time fees levied on those who get cash advances, go over their credit limit or pay late.
Any of the fees can boost the actual cost of credit well past the advertised interest rate.
In addition, the way banks calculate interest on revolving balances can drastically affect the amount of interest consumers pay.
In a complaint sent to Bankcard Holders of America, one woman maintained that her bank's use of the "two-cycle" method boosted one month's interest obligation from $25 to $80.09.
This method allows the bank to calculate the finance charge by adding two months' balances together -- essentially charging twice for the same purchase.
Bankcard Holders says the two-cycle system, which is legal, can cost consumers almost three times as much as the least costly method, which is based on one month's average daily balance, excluding new charges.
To illustrate, the consumer organization showed what would happen to two hypothetical consumers holding cards with identical interest rates who charged for exactly the same purchases.
The one whose bank used the two-cycle method would pay $196.20 in annual interest charges, while the other would pay $66.
Worse still, the organization says, the bulk of the charges usually are disclosed only in cardholder agreements given to consumers after they have received the credit card.
Bankcard Holders of America called the nation's 25 top credit card issuers and asked for applications and cardholder agreements on standard cards.
Only seven agreed to send a cardholder contract. The other 18 refused, unless a card was issued, the organization said.
"We feel the spirit of the truth in lending act is being violated," said Elgie Holstein, president of Bankcard Holders of America. "Even if you are sophisticated enough to decipher these cardholder agreements, there is enormous difficulty in getting the issuers to provide them in the first place."
Bankers acknowledge that nuisance fees are common and that different calculation methods can change a customer's effective rate of interest.
However, they say the fees are adequately disclosed.
"Banks have been making every effort to educate consumers about the fact that there is more to a credit card than its interest rate," said Virginia Stafford, a spokeswoman for the American Bankers Association.
"These fees are all disclosed, and they should be used as a basis for comparing products."
She added: "The question is whether consumers read what they get."
Results of the Bankcard Holders' survey, which examined companies representing about 50 percent of the credit card market, spurred the group to revise its "Low Rate, No-Fee Credit Card List" to reflect the hidden fees.
The list, which gives names, rates, fees and toll-free numbers for about 50 credit card companies, can be ordered through Bankcard Holders of America, 560 Herndon Parkway, Suite 120, Herndon, Va. 22070.
There is a $4 fee for non-members.