A new study by the Center for Responsible Lending finds that credit card issuers have managed to find new ways to pad their profit and work around the Federal Reserve Board rules and federal law set to take effect in February 2010. Even as old abuses are outlawed, CRL finds that new ways to squeeze fees out of consumers are being introduced and popularized.
Among them:
Pick-a-rate: Up until now, a variable rate card was usually tied to the prime rate on the last day of the last billing cycle. CRL’s report shows that a number of issuers now have added language to select the highest prime rate within a 90-day period. The change may seem innocuous enough but CRL estimates it currently costs Americans an additional $720 million a year.
Variable rate floors: A practice that seems to be spreading, this clause stipulates that a variable interest rate cannot go down from the initial rate when an account is opened, but can go up.
Minimum finance charges: Consumers with only a penny in finance charges get charged a minimum amount up to two dollars.
Compression of balance categories in tiered late fees: While late fees have traditionally been imposed on a sliding scale, with a larger flat fee charged for a larger total balance, issuers have been steadily lowering the tiers, such that the balance required to trigger the largest fees has been significantly decreased.
Inactivity fees: Issuers charge consumers for not using or closing their account, with fees as high as $36/year.
International transaction fees: Issuers are increasing charges for transactions in foreign currency and expanding the definition of foreign transactions to include those in dollars.
Balance transfer/cash advance fees: This change has been obvious for anyone following credit card deals. Larger minimum balance transfer fees and percentages are proliferating. Most balance transfer fees are now also uncapped.
