Jenny, Natalie, Jessica, Jordan, Kelly Jordan Jenny Jessica Natalie Kelly Credit-Card Fees: the New Traps Law Allows Some Aggressive Lender Tactics to.

Jenny, Natalie, Jessica, Jordan, Kelly

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Credit-Card Fees: the New Traps Law Allows Some Aggressive Lender Tactics to ContinueBy ROBIN SIDEL

What’s in the Credit Card Bill?President Obama signed the bill back in May

of 2009, and the bill took effect on February 22, 2010.

Card companies now must tell customers how long it would take to pay off the balance if they only make the minimum monthly payment.

Customers can only exceed their credit limit if they agree ahead of time to pay a penalty fee.

Changes for card issuers:Card companies must now tell customers

how long it would take to pay off the balance if they only make the minimum monthly payment

Unless a cardholder misses payments for more than 60 days, interest-rate increases will affect only new purchases, not existing balances.Hard hit for revenueThese bans could cause a loss of $12 billion a

year for card companies

How they will combat the law?Card issuers are deploying new tactics that

could prove more costly for even cautious credit card holders

Higher annual fees, higher balance-transfer charges, growing charges for overseas transactions

Companies can get around the law; if they raise the rate on new purchases as long as they provide 45 days notice

How will they combat the law?Citigroup:

If you pay on time, you receive a 10% credit on your total interest charge

If you do not pay on time, your interest rate is 29%

Card companies plan to switch customers from fixed-rate cards to variable-rate cards

More fees for extra servicesPaper statements & extended warranties on

purchases

How does the new law affect banks?• Last year, Bank of America and J.P. Morgan

Chase suffered combined net losses of $7.8 billion in their credit-card operations

• Banks are expecting that this year will bring more red ink unless there is a miracle rebound

• Banks could be hurt further as consumers try to clean up their finances, especially high-cost credit card debt

• The average American was running a credit-card balance of just over $5,400 at the end of 2009, down about $200 from five years ago

How does the new law affect banks?

Three years ago, banks were tripping over themselves to issue credit cards to just about anybody, and consumers were on a spending spree

They have pruned many of their more extravagant cardholders, and are using higher transaction fees to raise more money from cardholders who pay their bills each month rather than run up huge balances

U.S. banks on average increased the interest rate on their credit cards by about two percentage points between December 2008 and July 2009

Source - www.credit.com

What will they do to raise revenue?Banks already are reaping more fees on overseas

transactions, and are changing the definition an overseas transaction

In the past, people who made online purchases from foreign merchants, or who traveled to a country where the purchases are often in U.S. dollars such as the Bahamas, were generally immune from paying such fees

Citi and Bank of America recently imposed their 3% foreign-transaction fees on all foreign transactions—even if that purchase is charged in U.S. dollars

Discover Financial Services also began charging a new 2% for foreign purchases last year

What will they do to raise revenue?American Express Co., which is known for its lucrative

rewards programs, recently added new fees to its co-branded Hilton Hotels, Starwood Hotels and Delta Air Lines cards

Cardholders who pay late will lose their rewards points - they can reinstate them to their accounts if they pay a $29 fee

Fifth Third Bancorp is charging customers $19 if they don't use their credit card in a year

Citigroup is alerting some customers that it is assessing a $60 annual fee on their cards, but if you spend $2,400 on the card in a 12-month period the bank will refund the fee

How will this effect consumers?Usage changeHigher interest ratesHigher annual feesHigher balance-transfer charges Growing charges for overseas transactionsCountless new fees

Usage changeConsumers will try to clean up their finances

not be applying for credit cardstrying to pay off old debts quicker

Consumers will switch credit card holderscompetitors offer lower fee or none at allCompetitors will offer better transfer balance

rates

Increased RatesRaising rates is possible because

credit-card companies inform you ahead of time

they don't make any sudden rate changesthey are mostly free under the law to charge

whatever they wantthey can raise the rate on new purchases made

as long as they provide 45 days notice that they are doing so

•To get around government regulations:• Credit card companies plan to collect more interest by switching to variable-rate cards•More fees

•Paper statements, itemized transactions, foreign exchange

•Annual fees & inactivity fees•Reduced reward programs