San Diego, CA - Hardly a month goes
by when credit card holders receive their monthly billing
notices, there are some subtle changes being made to their
accounts and announced on one third of a page to fit the
envelope. In small type issuers explain the changes in the
terms and conditions of the cardholder agreements. Hardly
any cardholder reads these notices and the issuers know
it, so there is another clause, which states that the
cardholder's use of the card, after receiving notice of
the proposed changes, is indication of agreement to same.
The Federal Deposit Insurance Corporation (FDIC) issued a
consumer alert about theses changes going on in the
industry. The FDIC's alert reads:
"Credit cards offer great convenience to consumers, but
that convenience comes at a price. In recent years, card
issuers have raised or added new fees for their products
and services. While these costs are described in the
mailings and card agreements (contracts) consumers receive
from card companies, too many people forget about these
fees or aren't aware of them until after they've run up a
sizable bill. FDIC Consumer News asked Janet Kincaid, a
credit card specialist with the FDIC in Kansas City, for
examples of fees that are becoming more common or more
costly, yet still go unnoticed by many cardholders:
Monthly maintenance fees. Rather than charge an annual
fee, some lenders impose a monthly fee, often from $6 to
$12 a month, whether you use the card that month or not.
"Many people don't blink twice over $6 a month - it
doesn't seem so bad," Kincaid says. "But if they stopped
to think that they're paying $72 a year just to be able to
carry a card, they'd realize they could have done better
by paying a lower annual fee."
Balance transfer fees. You've probably received mail from
a credit card issuer trumpeting a "can't-beat-this" low
Annual Percentage Rate (APR) of, say, 2.9 percent on any
balance you transfer to that card from a competitor's
card. But, there also could be a fee for the balance
transfer that could outweigh the benefit of the low
interest rate. In addition, there may be no grace period
on the balance you transfer. "Interest often begins
accruing the moment the balance transfer is completed,"
Kincaid explains. "Even if you paid off the balance by the
due date, you may still incur interest charges."
Suppose you transfer a $100 balance at a special 2.9
percent APR to a card that otherwise charges a 15 percent
APR, and you already have a $200 balance on that card from
your previous purchases. Then let's say you send in a $50
card payment at the end of the month. It's important to
know how that $50 payment will be applied. Will the
payment go to reduce the "old" high-rate $200 balance or
the "new" low-rate $100 balance you transferred? "The card
issuer can decide how to allocate your payment, and unless
you know the card issuer's policy by calling the company
or checking your card agreement, you can assume the
procedures will benefit the card issuer," Kincaid says.
Cash advance fees. When you use your credit card to get
cash from an ATM, that's considered a loan, and you will
incur interest charges immediately, without a grace
period. But in addition, you may be charged a transaction
fee by both the financial institution that holds your
credit card and by the bank that owns the ATM you're
using. The fee can either be a flat dollar amount or a
percentage (perhaps three percent) of the cash advance.
The fee can make a simple cash withdrawal fairly
expensive. (See the related story about ATM fees.)
Fees for late payments. If you mail in your payment too
close to the due date and miss the deadline, you could
face a late-payment fee. These fees have increased in
recent years from about $15 to as much as $29. You may
face other penalties, such as having your interest rate
raised or your card canceled. Here's another alternative
to mailing a payment late: Consider calling your card
company to authorize it to "debit" (deduct) your payment
directly from your bank account before the deadline. "This
convenience will cost you more than a postage stamp,
usually as much as $10," says Kincaid, "but it's usually a
better, cheaper option than paying late and incurring a
Fees for sending in less than the minimum monthly payment.
Suppose you're expected to pay at least $50 for a card
payment but you only have $25 available, so you send it in
anyway. "Yes, you've made a payment," Kincaid says, "but
anything less than the minimum can be considered a late
payment, subject to a late-payment fee." Again, those fees
have increased to as much as $29 at many institutions.
And, because an insufficient payment is considered a late
payment, you could be subject to other penalties, such as
having your interest rate raised or your card canceled."
ICFE recommends consumers carefully read and understand
the entire credit card offer before commit to anything.
Next, monitor monthly billings or other mailings for
notices of fee increases or rule changes by credit card
New rules from the Federal Reserve Board also will make it
easier to see and understand key information about the
card's costs on the applications and solicitations.
Example: Card companies will soon have to clearly disclose
the APR for purchases charged to a credit card and other
changes, like adding Universal Default, in 18-point type.
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.