Congress passed a couple of laws to save you from being ravaged by credit card issuers and banks. In late 2009 there was the Credit Card Accountability Responsibility and Disclosure Act to restrict credit card fees and interest rates. In the Fall of 2010 there was the financial reform law. Not surprisingly, banks and credit card issuers reacted by finding other ways to keep their fee revenue rolling in. Here’s a guide to the new tricks and how you can avoid being gouged on fees.
Higher fees. Some types of fees weren’t regulated by the new laws, so banks make up for lost income by raising them. Foreign transaction fees are up by an average of 50%, and both balance transfer and cash advance fees rose by 33%. More modest increases occurred for annual fees (18%) and penalty interest rates (3.4%).
Higher minimum payments. The new rules say late fees can’t exceed the lower of the month’s minimum payment and $25. As a result, some card issuers changed the formulas so the monthly minimum payments on some accounts are higher than before the laws. There’s usually not much of a warning for this change.
Payment protection insurance. For a monthly fee, the card issuer will suspend finance charges and minimum payments if the cardholder loses his job. Issuers are trying to sign more people up for the service, and some people say they’ve been assessed the monthly fees without asking for the service. Some issuers enroll new card holders unless they opt out.
Prepaid cards. Some issuers now are pushing these cards that are exempt from the new rules. They tend to have a variety of expensive fees, such as activation fees, inactivity fees, and fees for loading more money onto the card.
Reduced payment periods. The law says there must be at least 21 days from the date the statement is mailed until the payment is due before a late payment fee can be imposed. But some issuers say they are open to receive payments Sundays and holidays, even if the mail isn’t delivered. So you don’t get a grace period to the next business day.
Low-limit cards. Often used by students and young adults, these cards now have a range of new fees, such as processing fees for issuing the cards.
Professional cards. Once a niche product, these are exempt from the new rules, because they’re supposed to be like corporate cards. But they generally carry the same features as consumer cards did before the new laws. So issuers are increasing marketing of the cards.
Debit cards. The use of debit cards grew substantially in recent years. Consumers like them, and issuers encourage their use with features such as reward programs. New regulations will reduce the money debit card issuers and processors receive from interchange fees. In response some banks are eliminating or scaling back reward programs and other plans to encourage the use of debit cards. Marketing of debit cards also is being reduced.
RW January 2011.