New federal laws should make it safe for you to get any new credit card you want, right?
Wrong. The CARD Act, passed by Congress in 2009, banned some of the worst credit card fees. But it also will cost credit card companies about $390 million a year in lost fees, David Robertson, publisher of the Nilson Report industry newsletter, told the Wall Street Journal.
Card companies are trying to make that money back, often by finding creative ways to tack new fees onto cards.
“Card companies are figuring out how to replace old fees
with new ones,” Victor Stango, an associate economist with the Federal Reserve Bank of Chicago, told the Journal in a recent story. “It’s a race between regulators writing ever-more-complex laws and credit-card companies setting up ever-more-complex fees.”
Here are some fees to watch out for, and one card you definitely should avoid.
Watch Out: High Upfront Fees
The CARD Act bars credit card companies from charging fees greater than 25% of a card’s credit limit. But some companies are getting around that limit by ratcheting up their application fees. Miles Beacom, CEO of First Premier Bank, defends the practice in a Wall Street Journal story, since the fees are assessed before the account is technically open.
In October, the Federal Reserve proposed new rules that would explicitly include activation fees under the 25% limit. The rules have not yet been adopted. In the meantime, read the service contract of any new credit card closely, and watch out for high activation fees.
More crazy credit card fees … »
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Reach Chris via email at chris@credit.com.
{ 3 comments… add a comment }
I had a friend you had a 60% interest rate on her card. I about fell out of my chair when she told me. The thing to remember is banks have taken a HUGH loss over the last few years. They must do whatever they can to try to make money. Financial institutions have balance sheets that look really bad. In this economic downturn consumers need money more than ever. We are turing to credit cards to help get us by, unfortunatly we are going deeper and deeper into debt.
sad. I always have felt like in the big scheme of things, those
who have stolen from others will pay some day. This is theft.
I am charged 22.9% on one card and have asked the company to
lower my interest rate and they refuse. We are in financial “non-bliss”
and having trouble making ends meet. This company is abusing us.
When I signed up with them my interest rate was 12.99 but they slowly
jacked it up.