Credit Card charges creeping up, in case you hadn't noticed
Credit Card charges creeping up, in case
you hadn't noticed
| by Robert Heady Bank Rate Monitor |
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You know
how debt counselors and consumer watchdogs keep telling you it's expensive
and dumb to go overboard with credit cards? That plastic only makes you
a slave forever to ridiculous rates, fees and charges?Well,
the card companies apparently aren't listening to all that palaver. They're
going right on raising their fees even higheronly a buck here and a buck
there, but it's adding up.Plus,
they're inventing new ways to slap cardholders not just once, but twice,
with higher rates if they're late with their monthly payments.Surprised?
I'm not. While the card issuers insist they're simply providing a service,
enabling great masses of people to conveniently access the credit market,
I'm convinced these guys are the No. 1 cause of so many people drowning
in debt and filing bankruptcy. And doesn't greed factor in there somewhere?By
the card companies' reasoning, it's not enough to charge 18 percent for
a credit card at the same institution that pays you 1 percent on checking
and 2 percent on savings. As they jack up their card fees even further,
they're betting few people will complain. Especially cardholders with bad
payment habits and spotty credit records, who aren't about to gripe.Here's
what's happened lately, according to my spot-check of a dozen of the biggest
credit card banks in the country:Worst
new wrinkle is the double-whammy clobbering of customers who dare to be
late with monthly payments not just once, but twice, in a six-month period.
Each time they're late, their interest rate jumps by several percentage
points.For
example, Bank One, Columbus, Ohio (1-800-945-2000), starts out with a low
4.9 percent introductory rate on its standard card, and the rate goes to
13.99 percent fixed rate after six months. The first time a payment is late,
the cost rises to 19.99 percentthe second time, to 22.99 percent.First
USA, Wilmington, Delaware (1-800-451-2491), which is owned by Bank One,
claims it issues "thousands of different cards through all kinds of
companies." It slaps late-payers with the same 19.99 percent and 22.99
percent penalty rates on its new Titanium card, whose introductory rate
is only 9.99 percent.In most cases, banks will keep
charging the stiffer late-payment-penalty rates for six months before they
lower them back down. So what's the bottom-line effect, say, on a $5,000
card balance at an outfit like First USA after the cardholder's been late
a second time? Try $325 in extra interest for those six months.SunTrust
Bank in Orlando, Florida (1-800-432-4932), boosts its rate to 19.8 percent
if the cardholder's payment is "late for two consecutive months,"
according to its customer service department. SunTrust's standard Classic
card is 6.9 percent for the initial six months before it leaps to 15.4 percent,
but its Gold card only rises to 13.4 percent.Banks
are quietly sneaking in the extra few dollars here and there on overlimit
fees, late fees and cash advances.People's
Bank, Bridgeport, Connecticut (1-800-426-1114), recently hiked both its
late fee and over-limit fee by $5, from $20 to $25. The GM Card, issued
by Household Bank in Salinas, California (1-800-947-1000), went from $25
to $29 on three fees: late payment, overlimit and returned check. GM is
among those with a low-ball come-on rate5.9 percent, which shoots up to
18.9 percent after six months, but charges 19.8 percent for a cash advance.Cash
advance fees are usually based on a formulaa percentage of the amount you
borrow or a dollar-fee amount, whichever is greater. Those numbers also
are creeping upward. For instance, Wachovia Bank, New Castle, Delaware (1-800-842-3262)
just hiked its charge from 4 percent or a maximum of $3, to 4 percent or
a $5 max. SunTrust now charges $20 if you go 11 percent or more beyond your
credit line.Are
there better card deals out there? Yes, if you shop. Examples: AFBA Industrial
Bank, Colorado Springs (1-800-776-2265), has an 11.4 percent variable-rate
card with no annual fee, and a 2 percent/$2 maximum cash advance fee. Huntington
Bank in Columbus (1-800-480-2265) offers a 9.5 percent variable rate card,
with a $39 annual fee.Wisest
move: Ask your bank for its fee disclosure schedule that reveals all the
charges. The institution must provide it to you by law.Figure
what the card is costing you per year, based on your typical monthly balance,
including the fees. Then get on the horn with a half-dozen other card outfits
and compare. You'll be amazed when you see all the differences.Editor's
Note: Robert K. Heady is the founding
publisher of Bank Rate Monitor and is the co-author of the
book, "The Complete Idiot's Guide to Managing Your Money." You
can write to him in care of the Bull & Bear Financial Report
or send e-mail to jrn18888@aol.com|| TABLE OF CONTENTS || Bull & Bear Newsletter Digest || Bull &
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