Breaking news: Credit card companies love fees and cardholders hate them. The U.S. Congress, after receiving constituent complaints for years regarding credit card companies' fees and practices, listened and agreed with the cardholding public. Those who compare credit cards will see some new fees and others that no longer exist.
CARD Act targets
The Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) targets some of the fees and practices formerly employed by credit card companies. After receiving thousands of complaints from consumers and constituents, the U.S. Congress addressed these issues in 2009.
After much study and debate, the CARD Act took shape as an overhaul of credit card company practices that were consumer-unfriendly. As well as including some large and unexpected fees, Congress determined that statements and card agreements were often difficult to read and understand, a situation most cardholders already knew.
The CARD Act attempts to correct, modify, and clarify monthly statements and credit card agreements. A credit card comparison should be easier for those who are "financially challenged." When you compare credit card offers, you should find fewer credit card deals that are confusing or convoluted.
For example, considering balance transfer credit cards was often a recipe for a headache. Evaluating the cheapest balance transfers often involved deciphering some deceptive and contradictory statements.
Credit cards might feature zero interest on balance transfers for the first six months, BUT the card company might charge you a three percent balance transfer fee on the total amount transferred. This was not a really "special deal" even for low interest credit cards. The new required language should help clarify these types of offers.
Further, your monthly statements should now be easier to read. Along with credit card rates, policies, and fees, your statement will show you the length of time it would take you to pay off your balance should you make only minimum monthly payments. You may not have realized it might take many years to eliminate your curre
nt balance using minimum payments. You will realize it now. You'll understand why you've been told to make more than minimum payments whenever possible.
Reading your credit card agreement will be much less challenging now. Using larger type and interspersing bold type in some areas should help you see and understand the agreements you are making.
For example, credit card rewards have been reduced on many credit cards because of the CARD Act. While unpleasant, the conditions to earn rewards should be clearer because of new language mandates.
Potential new credit card fees
As you may have guessed, this is a good news/bad news issue. Some fees have been eliminated, but others may involve increases as credit card companies attempt to make up some potential revenue losses.
For example, over-limit fees, charged by card companies when you charge over your stated maximum, are gone, technically. However, unless you specifically agree to permit charges above your limit, your over-maximum purchase will be rejected at the point-of-sale. You will, however, have the option to select this "service" if you wish—for a fee.
Also, some fees that many card companies formerly employed, but eliminated in prior years, may return. Here are a few former fees that may return. When you compare credit cards, look for evidence of these charges.
Also called membership or participation fees, these charges usually appear once a year. Typically ranging from $25 to $75 per year, these charges increase the effective interest rate on your credit cards.
Another resurrected fee, this fee is often applied to credit cards for "financially challenged" applicants. A setup fee ($25 to $45) serves to increase finance charges, sometimes significantly on the low credit limit cards issued to those with credit problems.
Seldom used over the past two decades, the application fee may become a new charge. Competition may dictate this charge to be a "deal killer" for low-interest credit cards. However, those with less than wonderful credit scores may face this charge with some accounts.
Credit limit increase fee
If you have a good payment record with your card company, you might ask for an increase in your credit limit. In turn, they may happily increase your limit—for a fee. If you think this fee appears to fall into the category "no good deed goes unpunished," you are correct.
Potential fee increases
Some current fees may be increased. These include over-limit (if you choose to have this "service"), balance transfers (percentage or flat charge), cash advance (when you need cash, not a purchase), and late payment (self-explanatory) fees.
Take everything into consideration
When you compare credit cards, always factor their fees into your finance charge evaluation.
While called fees, these charges serve to increase the credit card rates you face. Credit cards can choose to call extra fees and charges by whatever name they choose. All serve to increase the stated interest rate and overall finance charges.