Bankruptcy

Look Out for More (Legal) Credit Card Fees

By Chris Kramer

With the Credit CARD Act set to take full effect on August 22, many credit card issuers are reportedly already altering their policies to come into compliance with the law. And, because that law seriously limits some of the fees issuers can charge (including overdraft fees), many banks are also, according to this article, introducing new fees.

What You Might Notice

Make sure you?re reading your credit card statements closely in the coming months, as any new fees will be mentioned there. Here are some you might encounter:

• Annual Fee: This isn?t a new one, but many issuers have abandoned annual fees in favor of inactivity fees, charging customers who don?t use their cards often enough. Because the CARD Act outlaws inactivity fees, sources note that you should expect the annual fee to work much the same way: if you make enough purchases, your issuer might waive the expense, but if you don?t spend a minimum amount of money (i.e. if your account is too inactive), expect to pay.
• Foreign Transaction Fee: This is for when you make purchases in another country (regardless of currency) and is often charged in addition to a currency conversion fee. You can apparently expect this one to come to one to three percent of each purchase you make?to minimize the amount you pay, taking large amounts of cash out of ATMs and making cash-only transactions is often the best plan.
• Cash Advance Fee: Again, this one is already company standard, but sources report that you can expect your cash advance fee to rise in the coming months. Remember: cash advance may be convenient, but it?s expensive, as card issuers charge both a flat transaction fee and a steep interest rate (usually higher than your overall interest rate).
• Paper Statement Fee: Like receiving your monthly statement in the mail? It seems many banks have begun charging fees (ranging from $1 to $9 per month) to those who want paper statements. If you?ve got an email address and a printer (or digital storage space), you might want to opt out of this.
• Setup Fee: This is reportedly already common practice on most secured credit cards, which essentially work like debit cards: the transactions you make are secured by money you pay to the credit card company ahead of time. While secured credit cards can be useful as credit rebuilding tools to those with weak credit (including those recovering from bankruptcy filings), they?re expensive and often come laden with fees, so that you might have to pay a couple hundred dollars just to activate your account.
• Reward fees: Whether you want to redeem your rewards points or get them back after an issuer takes them as a penalty (maybe for a late payment), you?ll have to pay, usually between $20 and $50, according to the article mentioned earlier.

Full post as published by The Bankruptcy Blog on July 26, 2010 (boomark / email).