Banks have varied and wondrous ways to squeeze you for more money without you even realizing it, and there are few areas of service that afford bankers greater revenue opportunity than the ubiquitous credit card.

Everyone needs plastic, whether it be to pay for a business lunch or buy an airline ticket, rent a car or check into a hotel room.

But how many clients scrutinize the costs of using a credit card, other than to look at the interest charges on each monthly statement? How many take the time to calculate the true annual percentage rate, when all non-interest fees are included? Very few, and the law takes this into account. That’s why statutes such as the federal Bank Act, B.C.’s Consumer Protection Act and Alberta’s Fair Trading Act compel lenders to provide clients timely, comparable information about the cost of credit.

Last month, two West Coast women won the right, through a judgment of the Court of Appeal for B.C., to take three of Canada’s Big Five banks to court for charging interest during the days prior to the bank actually paying the merchant for the goods or services The bankers’ interest- calculation eccentricities are mild compared with what goes on in the United States. According to Public Citizen, a Washington, D.C.-based consumer protection association, institutions south of the border have used such tactics as:

* The Early Bird Special: The bank says payment is due on or before a certain date, but doesn’t post the payment unless it was received at an arbitrarily set early hour, i.e., 6:30 a.m. This leaves clients open to additional finance charges, and sometimes higher interest rates.

* Payment Jockeying: The bank advertises low annual interest charges for new customers, but fails to point out that the rate applies only to balances transferred from rival cards, with a much higher rate for new credit. Payments received first are applied to the low-interest balance, allowing the higher-rate balance to grow.

* The Late Hit: One bank has been known to routinely designate weekends and holidays as due dates. Some have forced customers to pay late fees even when monthly payments arrived on time.

* Hidden Add-on Services: Fee-based services can be a means of extracting more money from unsuspecting customers. One institution claimed there was no annual fee for its card, but failed to disclose the cardholder had to purchase a $156-a-year credit protection plan.

* Bait and Switch: Some banks promise low rates or no annual fees to attract clientele and then renege on these promises.

In the B.C. lawsuit, plaintiffs Cheryl Dahl of Mission and Donna Lewis of Vancouver alleged that the Royal Bank of Canada, Canadian Imperial Bank of Commerce and Bank of Montreal disclosed the interest rate to them as if the banks lent them the money as of the transaction date.

“In fact, the defendants did not advance money on credit-card transactions on behalf of the plaintiffs until the posting date,” Dahl and Lewis say in their 2002 statement of claim in the Supreme Court of B.C.

“This practice of back-dating interest charges has had the effect of increasing the true rate of interest.”

Dahl uses Royal Bank and CIBC VISA cards and Lewis uses a BMO MasterCard.

The plaintiffs, represented by Vancouver lawyer David M. Rosenberg, are seeking to have their lawsuit designated a class-action suit under the province’s Class Proceedings Act, which, if successful, could ultimately benefit untold thousands of cardholders.

“We’re anxious to go forward to a certification hearing and obtain a determination of whether it will go forward as a class action,” Rosenberg told Business Edge.

“If the courts uphold the plaintiffs’ claim in this lawsuit, then it could mean that millions of dollars in illegally obtained bank charges could be returned to VISA and MasterCard holders,” he said.

The banks insist that they may charge interest on a credit-card purchase even though they have not advanced any funds on the transaction date because their cardholder agreements allow this. Besides, say the banks, the transaction date is when the banks become liable for the purchase.

It typically takes a bank two to five days to recompense the merchant.

A lower court dismissed the case without hearing evidence, saying the banks did not violate any provincial or federal act. But the appellate court’s Mme Justice Risa Levine noted that no effort was made to examine the contracts, and on that basis referred the lawsuit back to the trial court.

“It neither serves the parties nor the development of the law for this court to make assumptions about what the contracts contain or do not contain,” Levine says in the judgment.

Rosenberg said he wasn’t surprised over the appellate court ruling. “I think it was wrong for the lower court to decide such important questions without looking at the evidence.”

In 2003, Cheryl Dahl filed a similar lawsuit against MBNA Canada in Ottawa, which issued her a MasterCard. The lawsuit, which continues to wend its way through the Ontario courts, makes similar interest-charge allegations.

MBNA also faces a legal action launched one year ago by Stephen Markson of Toronto, a Platinum Plus MasterCard holder who is seeking to have his lawsuit designated a class action.

Markson alleges that MBNA charged him $7.50 when he used a bank machine to obtain a $100 cash advance – a 94.11-per-cent rate of interest on an annualized basis. Markson’s lawsuit claims this rate is a violation of the Criminal Code of Canada, which sets the interest limit at 60 per cent.

(Brock Ketcham can be reached at brock@businessedge.ca)