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FDIC Consumer News
Special 10th Anniversary Edition - Fall 2003
Credit Card Fees Often Go Unnoticed Even As They Increase
In recent years, card issuers have raised or added new fees for their products and services. While these costs are described in the mailings and card agreements (contracts) consumers receive from card companies, too many people forget about these fees or aren't aware of them until after they've run up a sizable bill.
Here are examples of fees that are becoming more common or more costly:
Monthly maintenance fees. Rather than charge an annual fee, some lenders impose a monthly fee, often from $6 to $12 a month, whether you use the card that month or not. That fee may be more than the annual fee charged by other lenders.
Balance transfer fees.
You've probably received mail from a credit card issuer trumpeting a "can't-beat-this" low Annual Percentage Rate (APR) of, say, 2.9 percent on any balance you transfer to that card from a competitor's card. But, there also could be a fee for the balance transfer that could outweigh the benefit of the low interest rate. In addition, there may be no grace period on the balance you transfer. That means "interest may begin to accrue the moment the balance transfer is completed," says Janet Kincaid, a credit card specialist with the FDIC.
Cash advance fees.
When you use your credit card to get cash from an ATM, that's considered a loan, and you will incur interest charges immediately, without a grace period. In addition, you may be charged a transaction fee by both the financial institution that holds your credit card and by the bank that owns the ATM.
Fees for late payments.
These fees have increased in recent years to as much as $35. You may face other penalties, such as having your interest rate raised or your card canceled.
The lessons here? Read and understand a credit offer before you commit to anything. And, monitor your monthly billings or other mailings for notices of fee increases or rule changes by your card company.
Recent rules from the Federal Reserve Board also make it easier to see and understand key cost information on card applications and solicitations. Example: Card companies must clearly present the APR for purchases charged to a credit card in large print.
Excerpted from "Credit Card Fees Often Go Unnoticed Even As They Increase," Spring 2001.
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