Credit Card Issuers Face Fee Restrictions
“Fee-harvester” cards, for instance, stand to lose as much as 46% of the revenue they’ve been generating from these subprime credit cards. These cards, which are typically issued to people who do not qualify for standard credit cards or student credit cards, carry fees which can right now run as high as 71% of the card’s initial limit.
Fees can include: Application fees, program fees, account set-up fees, annual fees, and monthly participation fees. In one example, a card with a $250 credit limit carried $178 in immediate debt – before the cardholder even had a chance to access the $72 left in his credit line.
Under the new law, credit card issuers will be restricted to charging 25% of the card’s credit limit in such fees. However, there will still be no limit on the interest rate charged.
Over limit fees will also become a thing of the past for some consumers. Right now, you will likely be allowed to charge over your limit – saving you the embarrassment of a “turn down” at a retailer’s check-out counter. But that privilege carries a heavy fee – often $39 or more for each overlimit charge.
Under the new law you can opt out of the privilege to go over your credit limit, which may cause embarrassment, but will prevent overlimit fees. In addition, the credit card issuer will be limited to charging one overlimit fee per billing cycle, rather than a separate fee for each transaction.
Consumers will now have the option to pay either on line or over the phone – with no fee. Presently many credit card issuers offer free on-line payments, but charge as much as $15 for accepting a payment over the phone. Card issuers will still be allowed to collect a fee for expedited payments, so you should still pay a day or two ahead of time or at least early in the day on the due date.
For mail-in payments, card issuers will be prevented from charging late fees for payments received on the due date, or on the next day if the due date falls on a Sunday or holiday when mail is not delivered. When payments are made at a local bank, they must be credited the same day.
