November 21, 2017
 
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Credit Card Fees

The days when banks lent money to people they were confident would be able to pay them back are gone. In particular, secured loans, in the form of credit cards, are widely available, and even targeted to young people, students, the jobless, the elderly, and those on fixed incomes. Banks and credit card companies are willing to take the risk on just about anyone who breathes, all in the hopes of boosting their profits by getting more of your money and getting you into debt. Once you’ve signed a contract, the tricks begin—all the legal loopholes their financial experts designed, found in the fine print on the application, come into play. 
 
While we’re all familiar with the obvious fees such as APR, annual fee, late fee, over the limit charges, and balance transfer fees, there are also less common fees consumers need to be aware of that go above and beyond reasonable business practices. Some credit card companies will go the distance to squeeze the most vulnerable customers.

 

Excessive Fees

The best way to illustrate this is with a real world example as presented by Alys Cohen to the Senate Subcommittee on Investigations regarding credit card practices, on March 7, 2007. A sailor opened a credit card account with a credit limit of $250 and a 9.9% APR. Immediately he was charged a program fee of $95 and an account set-up fee of $29. The following day he was charged a participation fee of $6 and then three days later, an annual fee of $48. His first bill was for $178 and he hadn’t even purchased anything! The story doesn’t end here. A week later, he made four purchases, totaling $84.95 and then he was charged another participation fee of $6 for the next billing cycle. With all the fees, he was over the limit; therefore, he was charged $25, plus a late fee of $25. He now had a grand total of $320.81, which included a finance charge of $1.69. The next billing cycle, the sailor did not make any new purchases, but with interest, the participation fee, over the limit fee, and a late fee again, his balance was $379.45. You can see how quickly the fees can mount, and how quickly the debt grows. This is not an isolated case; thousands of credit card holders are subjected to excessive fee structures that they probably didn’t know about when they signed on.

 

What you can do

Clearly, it’s best to avoid any card with mysterious fees. There’s no way around it—consumers need to read the fine print. If you don’t understand it, call the issuer and ask. If you already have a card with a growing balance because of an excessive fee schedule, stop using the card! Set up automatic payments to ensure it gets paid on time every month.  Also, track your account online if possible. At the same time, it doesn’t hurt to ask them to waive the fees, they just might comply.

 

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