Credit Card Fee Increases

This month on our two credit card statements are notices informing us that as of Oct. 1st we may be charged "more than two" late fees or over the limit fees" per month. What's going on?

Gwen

It's estimated that Americans charged $1.8 trillion in 2005 on the 690 million credit cards outstanding. According to a Government Accountability Office study released in September, 2006, 13% of credit card users were assessed over-limit fees and 35% were assessed late fees in 2005. So Gwen has a lot of company.

Let's try to do three things. First, understand what these fees are. Next, see how fees are changing. And, finally, what Gwen can do to keep from being hurt.

Credit cards have always had fees. Some, like for a late payment, are understandable. Others came along as credit cards took on new capabilities. Think cash advance and balance transfer fees. Still others, like over-limit fees, seem like they shouldn't be possible. You would think that they wouldn't allow you to borrow more than your limit.

There are also 'penalty interest rates'. If you're late with a payment or go over your credit limit you could see your rate bumped to 30% or more.

The 2006 GAO study looked at fees and penalties. It said that not only were fees increasing, but the credit card companies were doing a lousy job of informing consumers about those fees.

The credit card companies are obligated to tell you about any fees or penalties and how they're triggered. Some fees, like paying your credit card bill by phone, are sometimes not clearly disclosed. What Gwen received with her statement was a notice of a change in how fees would be charged. And, as long as she's notified they can get by with almost anything.

Late fees have nearly tripled in the last 11 years. And many cards have adopted a 'universal default clause' that says a late payment on any card will trigger the penalty interest rate.

Credit card companies say t