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Hidden Credit Card Charges and How to Avoid Them

Written by Ilyce Glink on October 14, 2013 in Credit  |   No comments

Hidden credit card charges may be costing you hundreds of dollars each year—but how can you spot them? Learn about the five major types of hidden credit card charges, and how you can avoid these “grey charges.”

creditYou may already know to be on the lookout for fraudulent charges when your monthly credit card and debit card statements arrive in the mail. However, you may also want to scan your statement for hidden credit and debit card charges to which you’ve unknowingly agreed.

Deceptive credit and debit card charges that pile up as a result of misleading sales and billing practices—dubbed “grey charges” by personal finance security company BillGuard—cost American credit and debit cardholders $14.3 billion in 2012, according to a recent report by BillGuard and research firm Aite Group.

According to Aite Group estimates, there are about 233 million grey charges on U.S. credit and debit cards each year. Approximately three in 1,000 charges are grey charges, and the average grey charge rings in at $61.

Among the BillGuard customers surveyed with at least one grey charge, about one-third paid between $100 and $500 in grey charges in 2012 alone, and almost one in 10 paid more than $500.

“If consumers avoid hidden charges, over time they can save themselves hundreds, if not thousands, of dollars,” says Howard Dvorkin, founder of Consolidated Credit Counseling Services.

What are common hidden credit and debit card charges?

1. Free-to-paid charges. Many consumers find themselves dishing out dollars for what are known as free-to-paid charges. These are some of the most prevalent types of hidden credit card charges, according to the BillGuard and Aite Group report. Consumers get hit with free-to-paid charges when they initially receive a product for free or a nominal fee during a trial period and then are automatically charged a fee unless the service is cancelled or the product returned.

2. Phantom charges. Phantom charges can creep up on credit and debit card statements when a consumer makes a purchase and, as an added bonus, receives another product or service that is believed to be a free gift. Sometimes the additional offer comes from a third-party seller—not the business offering the initial product—and the additional product or service isn’t actually free.

3. Service and luxury charges. These charges often come with having a bank account, opening a special type of card, or processing a particular request, and they are often tacked onto luxury items.

4. Zombie charges. Zombie charges sneak up on consumers who have canceled a subscription service—such as an item of the month club—yet still get charged for it over and over again.

5. Unintended subscription. Consumers may encounter unwanted subscription charges if they make a one-time transaction that automatically turns into an ongoing subscription.

What can I do to avoid hidden credit and debit card charges?

Aite Group estimates that credit and debit cardholders could save almost $7 billion of the approximately $14.3 billion in grey charges annually by monitoring and tracking hidden charges. As you swipe your credit or debit card to make purchases and receive your monthly statements, consider these seven tips:

1. Carefully read all agreements, terms, disclosures, and conditions in full so you know exactly for what you are signing up or purchasing.

2. Think twice before disclosing your contact and personal information for free promotions.

3. If you sign up for a free trial, mark your calendar or set a reminder on your phone or computer so you can cancel the product or service before you are charged.

4. Pick one credit card to use when signing up for new services. This will make it easier to monitor all charges.

5. Review your monthly statements to confirm all credit and debit card transactions.

6. If you do spot an unauthorized charge on your statement, dispute it immediately with your credit card company or bank. You can also dispute the charge with the company that is imposing it. When a card issuer is investigating a dispute, it can’t report your account as delinquent as long as you have paid the undisputed charges or the minimum amount due.

7. If hidden credit card charges continue to pop up, ask your credit card company or bank to close the affected account and issue a new one.

Hidden charges are often described using confusing language and can be difficult to pick out in lengthy terms of service agreements. Unfortunately, in most cases they are neither fraudulent nor illegal, and they may be costing you extra money without your knowledge.

By regularly scanning your monthly statements and thoroughly reading any service agreements before signing, however, you may be able to prevent these charges—and save yourself some money as a result.

Ilyce Glink is the author of ten books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Her nationally syndicated column, “Real Estate Matters,” appears in more than 125 newspapers and Websites, and her online “Ask Ilyce” columns are read by hundreds of thousands of people every month. She is a top-rated radio host on WSB Radio in Atlanta, the Home Equity blogger at CBS MoneyWatch.com, host of the Internet program “Expert Real Estate Tips,” managing editor of the Equifax Personal Finance Blog, and publisher of ThinkGlink.com.

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