Buried by credit-card fees? Washington is on it.
Obama is to meet this week with banks about card-holder complaints. Congress is weighing a 'bill of rights' for borrowers.
Forget the credit-card designer colors, the low-interest “teaser rates,” and the reward programs. It’s time to look at the fine print of credit cards, and, to some, the higher costs outlined there are “ugly.”Skip to next paragraph
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Tales of soaring interest rates and fees for credit-card holders have captured Washington's attention, which will focus this week on possible remedies. Congress, which has not addressed substantive credit-card reform in decades, is close to approving a "credit-card holders bill of rights," and President Obama is set to meet with banks and credit-card issuers on Thursday about consumer complaints, especially sky-high interest rates, according to Lawrence Summers, the president's chief economic adviser.
“Once the ... chief economic adviser says the president is focusing on credit cards right now, that is issue No. 1, no question,” says Joel Naroff of Naroff Economic Advisors in Holland, Pa. “In terms of credit cards, we are in the process of going from irresponsible to responsible, and that process [of adjustment] is ugly – and that’s what we are involved with right now.”
Banks, which are seeing defaults and delinquencies rise on credit-card debt, are expected to tell Mr. Obama that they are taking steps to minimize their risk by raising rates and limiting their costs. Moreover, they say, it costs more for them to borrow and then relend to consumers because the securitization market for credit cards is still frozen.
For some, rates above 25 percent
Among the rate hikes or fee increases consumers are seeing are the following:
•Capital One increased rates for new customers on 15 cards. The Platinum Prestige card went from 7.15 annual percentage rate (APR) to 11.9 APR. The No Hassle Points card jumped from 8.15 percent to 13.90 percent.
•Citi changed its ThankYou reward structure by basically doubling the points needed for a $400 flight.
•Bank of America and Citi began charging a 3 percent fee, in US dollars, for all transactions made outside the US.
But borrowers who are tardy or behind on their payments see much uglier rates and fees. The companies with the highest interest rates for that subset of consumers, according to LowCards.com, are HSBC at 31.99 percent; Chase, Citi, and Discovery at 29.99 percent; and American Express and Bank of America at 27.24 percent.
Some consumer groups are outraged about the run-up in interest rates and other changes banks are making, such as shorter grace periods between the day a statement is mailed out and the day the payment is due.
“It’s almost impossible to pay a bill on time when they change the due date, the mailing date, and the definition of late from 30 days to 1 minute,” says Ed Mierzwinski, consumer program director at the US Public Interest Research Group in Washington.