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Watch Out for New Credit Card Fees

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With the Credit Card Act of 2009 looming, its rules will go into effect in February, credit card companies are starting to institute more fees ahead of the rules changes. A new Wall Street Journal article cites several of these new fees including $1 processing fees for printed statements, reduction in rewards programs, and fees for inactive accounts. We first talked about some issuers charging fees if you didn’t meet a certain spending threshold last August.

Much like with banks, leave them if you don’t like it. I thought the comment by Christopher Moss, who holds a card that will start charging $1 for statements, that he was “prepared to cut up the credit card even though he likes the loyalty rewards that come with it” was a little silly. Just get electronic statements and you can keep your rewards and not get charged the fee.

In the end, banks and credit card issuers will need to make money to keep their shareholders happy. If they can’t get it through overdraft fees or some of their other existing fees, they’ll get it somewhere else. Now I can’t wait for the rash of people complaining about how they opted out of overdraft protection and start seeing their checks bounce (banks were making a ton of money on overdrafts for a reason…)

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27 Responses to “Watch Out for New Credit Card Fees”

  1. Kate says:

    Overdraft fees are the devil so I will continue to have the overdraft protection, though I thankfully have never actually used it since I signed up for it.

    Thanks for this post, I am going to make sure that my credit cards aren’t adding any fees and if they do, will look elsewhere.

  2. zapeta says:

    My cards haven’t tacked on any fees yet other than raising interest rates. I got a letter from one of my credit card companies yesterday explaining how my terms would change with the CARD act but no new fees. We’ll see if any of my other credit card companies on any fees in the next couple weeks.

  3. Evan says:

    I feel like no one in congress even bothers thinking through unintended consequences.

    What were the odds that Visa or amex were going to allow their balance sheets to lose a few hundrend million?

    • Johnny says:

      Visa and Amex?? They are transaction-processing companies. Is it not the banks that do the lending on credit?

  4. tbork84 says:

    I have gotten two updates on my policy with my two Bank Of America credit cards, and neither instituted any rate changes from what I had previously. Then again, by reading those policy updates, I positive that am in the minority.

    I am one of the few that doesn’t earn my bank and credit issuers much if any money.

  5. Seth @ Boy Meets Food says:

    I have wondered for a while now how long the “free” money could last. I would guess that many of us who frequent personal finance sites, have rebate cards, and pay off the balances in full. So, the issuers are paying us the dividends they earn from the retailers. I wonder if cash back cards are doomed???

  6. jsbrendog says:

    it is only a mater of time before rewards for us pay on time folk are extinct. DAMN YOU!

  7. pmulroy says:

    I’m with Evan,

    This is another case of congress sticking their hands into something to “help” consumers and just making things worse.

    I wasn’t thrilled with the rules credit card companies had in place before such as being able to change your “fixed” APR any time they wanted or applying payments to the lowest rate balance, but I (and everyone else) knew the how the game was played.

    All of a sudden people who were bad at following the rules complained that credit card companies were making money off them (surprise!), and congress has to come running to the rescue. Well if you put a bunch of rules in place to prevent companies from making money off people who cant use credit responsibly, guess what they are going to try and make money off of the people who do use credit responsibly.

    Now all pseudo-fixed rate cards are changed to variable interest rate, everyones APR is jacked up by 10%, perks are being discontinued or reduced left and right, and annual fees for all credit cards can’t be too far away.

    Thanks congress!

    • NateUVM says:

      You are getting a service from the credit card company. You have the ability to take out a 30-day (or longer) loan. In the case of “no annual fee,” as long as you pay it off each month, you get that service for free.

      In a perfect world, where everyone pays off their credit card bill…is this sustainable?

      Or, is it a system that RELIES on people to carry a balance, make late payments, etc…?

      To me, that system is flawed. I’d rather pay a little for the service I receive than to live with the knowledge that the benefits I enjoy are breaking the financial backs of my neighbors.

      I’d rather that the financial products we use were priced correctly. Fairness and transparency are what is going to improve our economy in the long run. Not the targeted lining of some people’s pockets.

  8. Evan says:

    Mark,

    Why are the banks greedy because they want to turn a profit on a debt vehicle? It is that kind of attitude which makes Congress interfer with the free market

    • NateUVM says:

      The primary function of banks is to serve as a financial intermediary between those that have “extra” money and those that need more money. In most simple form, the profit that they earn should come primarily from the difference in the rates they charge those that they lend money to (those that take out loans) and the rates that they offer those that they borrow money from (depositors).

      There has lately (last 15 years, or so) been a shift in the source of revenue for banks, though. By advertiseing a low-cost product, they are then able to re-coup some of that revenue by charging fees on the back-end. Those of us that are responsible end up getting a great deal. Those that aren’t…well, they end up paying a LOT more than what they may have thought they had to.

      This isn’t to say that this setup isn’t fair, there is ALWAYS the fine print to consult… But this paradigm is a deliberate attempt to attract as much business as possible without any thought to what happens to the consumers it traps.

      Now that there will be more regulation, banks will no longer be able to charge fees on the back-end and will have to price their products more appropriately. Will those that “behave” lose out on great deals? Yes. But products and their pricing will be more transparent. There will be more truth in the advertising.

      If there are banks that fail because they can no longer afford to participate in a market where they can’t rely on massive fee revenue and instead have to act primarily as the financial intermediaries that they are supposed to be…. I’m all for it.

      • Chris says:

        This often happens when the market squeezes for lower rates and the surplus of institutions compete harder and harder for funds to loan.

  9. Shari says:

    I’m interested in what ideas consumers come up with to take advantage of bank policy loopholes just as the banks took advantage of the government loopholes.

  10. Izalot says:

    Watch out also for annual fees. My Chase card initiated that recently and I will be talking to them in the upcoming months to see if I can get it waived.

  11. daenyll says:

    I’m worried about possible inactivity fees and annual fees. I enjoy my rewards card, but have an older card that I keep for both the safety net( in addition to CDs of emergency fund) and the credit history but I don’t use it. So far both cards have remained without fees and the rewards haven’t been reduced, but who’s to tell in the next couple of months.

  12. Mike Ng says:

    Jim, I think a lot of the reasons why a lot of credit card companies are adding these new fees is because of the new restrictions on credit card companies, including limits on interest-rate increases, more disclosures, and a restriction where banks can’t raise interest rates on current balances unless the customer is 60 days late on their payment.

    I am livid about all of these new fees that are creeping up but understand that banks need to make up for lost revenue.

    You won’t see me cutting up my credit cards anytime soon. With most credit cards, you essentially get an interest free 30 day loan every month. Sounds like a pretty good deal to me.

  13. javi says:

    I am glad that none of my cards have instituted new fees, but I will keep an eye on that. I would rather take my business to another company, than pay excessive fees.

  14. Soccer9040 says:

    I moved my cell phone auto pay over to one of my inactive cards just to keep some activity on it. I’ll see what chase does in the future with it.

    • Chris says:

      I made a similar move one one of mine just to keep it active. I don’t want to lose the line.

    • NateUVM says:

      I did something similar. However, the card I want to keep active is relatively inactive for a reason… I get better rewards elsewhere. So, I do an autopay for most of the bill off my card with the better rewards and leave about $10 to manually pay with my oldest, more dormant account.

      Am I trying too hard to earn more points on my other account? Will I have to rachet up how much I pay on my older card if credit card co’s have to place minimum usage thresholds to avoid fees? Maybe yes to all of that… But, so far, it works well for me.

  15. eric says:

    I’ve definitely seen more annual fee cards. What irks me the most is the extra charge for paper delivery. It’s fine for me because I love doing everything online but for people like my parents, who’ve grown used to paper statements for decades and aren’t familiar with online banking, this completely sucks.

    • zapeta says:

      I agree! My parents don’t know how to view their bill online and they don’t usually pick up much when I give them computer lessons. Its pretty ridiculous to have to pay to get a bill! You’d think they’d want to send you a bill so you can pay them!

    • Chris says:

      Maybe its time to change CC companies.

      • NateUVM says:

        Yeah, but this is part of the process of “progress.” As the internet gets even more intergrated into everyone’s daily lives, and paperless delivery becomes more-and-more the norm, older technology (Regular Mail) isn’t going to be as well supported. Instead of being a normal business expense, these companies are going to see it as an expense that they’ve eliminated on their side to increase efficiency. So, now that expense, if incurred, is going to pass the consumer (in a way, it always has been). To receive the older-type service is simply going to cost more.

        It’s the same story as with any out-of-date technology, etc… It’s unfortunate for those that aren’t willing/able to embrace the “future.” But I think that’s just the way it is and the natural progression of society, etc…

  16. Rich says:

    I think at the end of the day, the banks are going to find a way to squeeze every last dollar they can from their customers. I have credit cards and probably always will. The secret is to never NEED them. They are a convenience and the day that convenience becomes too costly is the day I put them through the shredder!

  17. SMEE says:

    I am older and I can use the internet just fine, but I still like hard copy because when your PC crashes and you have not printed out whatever like bank statements your up the creek without a paddle. Banks will only let your go back a few statements per year. It is not nice to not have receipts for tax time.

  18. SMEE says:

    RE: credit card fees. I carry two cards I am willing to pay fees on and a bunch of others I never use. These I never asked for and now I have to opt out or pay the stinking fees. At my age I am opting out even though it will affect my FICO That doesn’t matter to me now. One one of these cards I did charge a lot cause interest was lower than my CD. Too bad for those who need those cards now. I always pay my balance off in full. So those who can’t pay plus additional fees are going to start a new crisis in finance.


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