Time Out on Cash Back

And, then, credit card companies "do make mistakes," he said, adding that Vogel's complaint is a common one he hears from consumers.

He thinks maybe the delay in posting the full 5 percent relates to the fact that rebate money held back a couple of billing cycles earns big interest for you-know-who. "I see no justification for the delay . . . especially a delay of two to three months," he said. "You can rest assured that it doesn't take Citibank two to three months to collect its fees from the merchants."

John Oldshue, owner of LowCards.com, a credit card comparison Web site based in Birmingham, says Vogel's complaint reflects bigger credit card industry problems.

"With credit cards, you are getting almost the same amount of legal wording you get with a mortgage . . . but nobody's reading them and nobody's explaining them," says Oldshue.

Never mind that signing up for a credit card constitutes a legal contract to borrow money and accept a loan that could reach thousands of dollars and cost exorbitant interest rates. Or that the issuer can change the deal any time it wants-- as long as it gives you a 30-day warning (see the AT&T Universal Card fine print: "We may revise any of these AT&T Universal Cash Rewards Card Terms and Conditions at any time with 30 days prior written notice").

Why? Because it works: The credit card industry took in pre-tax profits of $35.6 billion last year, according to R.K. Hammer, a credit card industry advisory firm -- up 6 percent from 2004 and more than 15 percent from 2001.

"People often don't understand what they are getting into," says Oldshue. "There's an epidemic of problems [like that] with credit cards."

Most notably, something called "universal default penalty rates." Credit card companies have forever been charging late fees and incrementally raising the interest rates of cardholders who make late payments -- a policy considered fair enough. But now they're scouring cardholders' credit reports in search of slip-ups, a single late payment, totally unrelated to the credit card account -- and then they use it as an excuse to label the cardholder a "risk" and jack up his interest rate to unconscionable levels.

"That really ticks people off," says Oldshue. "We're a society that is ruled by contracts, and consumers sometimes don't realize that. Businesses go into [a deal] doing these flowery promotions -- but the devil's in the details. As painful as it can be, you have got to read the agreement and understand what you are getting into."

In its credit card study released in July, Consumer Action examined 146 cards from 47 issuers to identify why and how banks imposed universal default penalty rates. The San Francisco nonprofit consumer-education and advocacy group found that 45 percent of banks surveyed charged universal default penalties for arbitrary reasons, such as late payments, a drop in credit score, too much debt or a new credit card.

"The bottom line is, don't pay anything late," says Consumer Action's director of national priorities, Linda Sherry, who coordinated the survey. "That starts the domino effect going, and you can be dead meat! You could even end up with a credit card at close to 30 percent interest rate."

These questionable practices are gradually getting attention from lawmakers and federal banking regulators. Recently, regulators provided new guidelines to credit card companies for increasing cardholders' minimum monthly payments so cardholders can escape the pay-forever Catch-22. And the Federal Reserve Board supposedly is considering revisions that would clarify credit card disclosures. And in Congress, a House bill called "The Consumer Credit Card Protection Act" would prohibit arbitrary universal default penalties. Another bill, "The Loan Shark Prevention Act," would establish a fair cap on credit card interest rates.

Meanwhile, Vogel's complaint and similar feedback from other cardholders has convinced Citigroup that just maybe the terms of the AT&T Universal card's rebate program and billing statement aren't clear enough. "We are going to undertake a statement redesign to make these matters more clear," Wang says.

Cardratings.com founder Arnold is skeptical: "Remains to be seen if it will actually be clearer," he says, "and whether it will help."

Got questions or comments? A consumer complaint? A helpful tip? E-mail details toconsumer@washpost.comor write to Don Oldenburg, The Washington Post, 1150 15th St. NW, Washington, D.C. 20071. Because of the volume of mail, personal replies are not always possible.