Friday, February 05, 2010
Determined to make up for lost revenue from the 2009 Credit CARD Act, issuers of credit cards are increasingly relying on other fees not restricted by the federal legislation. The Center for Responsible Lending has determined in a report that credit card companies are using at least “eight hidden charges across more than four hundred million accounts” to keep their businesses profitable.
Among the new ways lenders are gouging customers is pick-a-rate, in which companies change the formula for calculating variable interest rates. This costs consumers at least $720 million a year. Another trick is variable rate floors that prevent interest rates from ever falling below a new credit card’s starting point.
Consumers who pay off their balances and chose not to use a credit card can still be a source of revenue through the use of inactivity fees, which can be as high as $36 a year, according to the center.
-Noel Brinkerhoff
Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate (by Joshua M. Frank, Center for Responsible Lending) (pdf)
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