To nobody's surprise, credit cards are still imposing fees on their customers.
It wasn't necessarily supposed to be quite this bad, however. The Credit CARD Act, which goes into effect on August 22, is aimed at making credit cards more transparent, fair and a little less fee-heavy. But while some fees are going to be outlawed, many credit cards are just inventing new ones (or turning to some tried and true oldies) to replace them.
So if you have a credit card, I fee your pain (and now you know why I never made it as a stand-up comedian.) While the Credit CARD Act seemed to bring the promise of fixing all of our credit card woes, it appears that there will always be a way for the issuers to nab us with an array of creative fees and penalties.
The credit card industry is, after all, a business, and you're the customer. It can be easy to forget that when your piece of plastic is there, day and night, in your wallet, doing everything from helping you out of a jam to helping you buy jam. So if you haven't looked carefully at your statement lately, here are some of the fees you may have not noticed.
The annual fee makes a comeback
As many consumers tried to cut back on credit card use, they found that they were getting dinged with a so-called inactivity fee. Ranging from $50 to $100, these fees are charged by credit card issuers when the cardholder hasn't been using it much. Come August 22, however, inactivity fees will be forbidden, says Beverly Harzog, a spokeswoman for CardRatings.com, a credit card comparison site.
But that doesn't mean that you won't still get charged for not charging. It will just be done under a different name: the annual fee.
The annual fee has been around for years, but a lot of credit cards had disposed of them. No more. "Annual fees have made a comeback," says Harzog. To make it seem like they're giving you a deal, some cards "will waive the annual fee for the first year or after a certain amount of purchases," she says.
"What I think you'll see are cards tying your activity to the annual fee," says Scott Crawford, CEO and founder of DebtGoal, an online site that helps people manage their personal debt.
For example, the card issuer will waive the annual fee if you use the card frequently, but if you don't use the card much, you'll be charged. So basically you're being charged an inactivity fee, but in this case it's legal because it's called an annual fee, he says. Credit card companies love the art of semantics.
The foreign transaction fee
Those who've traveled a lot are probably well aware of currency conversion fees. These are the extra charges you get when buying something while your traveling in a country that uses a currency other than the U.S. dollar. The fee is supposed to cover the cost of currency conversion.
Now these fees have a new name: Foreign transaction fees. They can be applied to basically any purchase made overseas -- even if the exchange is done entirely in U.S. dollars. And these fees can really add up. "It's usually around two to three percent," says Harzog. "Not all cards have this fee, but a lot of them do."
The cash advance fee
This, of course, isn't a new fee. It's an old favorite of the credit card industry, but we'd be remiss not to remind people about it. Yes, says Harzog, "It's an easy way to get the extra cash you need. But most cards charge a fee--around five percent--plus a high interest rate on the amount. So you're paying the fee, plus more interest than your regular APR is."
Also worth noting, cash advance fees are creeping higher. Discover, for example, increased its cash advance fee last January from 3% with a $5 minimum to 5% with a $10 minimum, and a month later, Citigroup raised its cash advance APR from 21.99% to 25.24%.
The paper statement fee
Fortunately, you can avoid this one, if you want to. A lot of credit cards and banks are charging customers anywhere from $1 to $9 a month to receive a statement in the mail. Yeah, it's pathetic, but if you opt out of paper you won't get charged. You may resent the credit card company for nickel and dime-ing you, but at least you're helping the environment.
The set-up fee
This isn't new either, but they're unfamiliar fees to anyone who has never had a secured credit card, which requires the holder to put money on the card upfront. Secured credit cards help people with poor credit histories build their credit. The set-up fee is pretty much what it sounds like. The secured credit card charges you a fee, out of your own money, to set up the card. Which is kind of crummy, if you think about it. Let's kick the person while they're down.
"You see this a lot with people who have low credit and low credit lines, especially with secured credit cards," says Crawford. "When I used to work for HSBC, we used to see this all the time. A person would put down $300 or $500 on a secured credit card, and there would be a $100 set-up fee, and a $60 annual fee, and so by the time the person got their credit card, they'd have $100 or less on there, and then they'd spend money, thinking they had $300 on the card, and so by their first month, they're already over the limit."
Reward redemption fee
If you need proof that there is no such thing as a free lunch, this is a long-standing practice: many credit cards charge fees when consumers redeem rewards like airline miles. As CreditCards.com observed in a recent article, the fees can be around $20 to $50 and are intended to pay for the administrative costs that go along with redeeming those rewards. Nevertheless, those fees can have a way of making your rewards a little less, well, rewarding.
Reward recovery fee
And guess what? If you make a payment late, "they'll sometimes take your reward points away, which is, in essence, a fee," says Crawford.
But don't worry. If that happens, you can call your credit card company and try to argue your case. Your pleas may fall on deaf ears, but often customers have been able to convince credit card companies to return their rewards points -- for a fee, of course. Typically around $29.
So what to do if you feel you're being crushed by the weight of fees? Well, you can always call your credit card company, says Crawford. It may not be revolutionary advice, but he says that anecdotal evidence suggests that a lot of people are having some luck getting fees lowered. On the other hand, be careful how you negotiate. It may just be best to complain about the fees and not go much farther than that.
Even though the Credit CARD Act is designed to protect consumers from credit card interest rates going way up from one month to the next, if you aren't careful, simply talking to a representative about that lower monthly payment can wind up raising your interest rates. That's because financially overwhelmed consumers will call their credit card issuer, trying to get their monthly payment lowered, which the cards will sometimes grant, but only if the consumer agrees to take a higher APR on their card.
"It's a sneaky way to get someone to agree to an interest rate increase, and it's totally legal," says Crawford, who adds that he doesn't begrudge the credit cards' desire to make money. "I don't demonize them maybe as much as some people do," says Crawford, "but I do think their interests aren't aligned with the customers, and that's unfortunate. In a lot of these cases, whether it's your bank or credit card, people are making money when you screw up, and that's a problem."
Geoff Williams is a frequent contributor to WalletPop. He is also the co-author of the book Living Well with Bad Credit.
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