Credit Card Bills: Tricks, Traps, Confusion

By Candice Choi -- AP Personal Finance Writer

NEW YORK (AP) — They say one thing, but often mean another.

It's one reason credit card statements can slowly ensnare people into bigger debt loads. The mysterious stew of fine print on the back of bills doesn't help clarify matters.

A law passed in May will bring some relief. Starting next year, credit card companies will need to make statements easier to read and spell out the price of carrying a balance.

For instance, companies will need to provide a table showing how much interest charges will cost if only minimum payments are made. Cardholders will also be shown how much they need to pay each month to deplete a balance within three years.

What the law won't do is wipe statements clean of misleading or confusing terms. The details of just how banks will implement the changes by February aren't yet clear either.

So until then, here's a guide to decoding what your credit card statement really means.

AVAILABLE CREDIT

There are two reasons why the term "available credit" is misleading.

The first is that card companies don't have to stop you from exceeding your credit limit. But they will slam you with a fee for doing so.

Nearly all cards have over-the-limit fees, with the average being around $29, according to Consumer Action, an advocacy group based in Washington, D.C. One provision of the new credit card law is that card holders will have to elect the option to make charges beyond their limits.

The second reason the term is misleading is that a transaction can be denied before your so-called available credit is used up. This might happen if your spending habits are deemed risky or out of character.

For instance, starting to carry a balance after years of paying off bills in full could trigger a clampdown. Another red flag might be if you get too close to drying up your credit limit, said John Ulzheimer, president of consumer education at Credit.com.

"That's when you might see them starting to slam the brakes," he said.

Another common mistake is confusing your available credit with your cash advance credit line. The two should be listed separately, with the latter coming with a significantly higher interest rate.