Credit Card Fee Frenzy! + readers comments
It’s another circle in the vicious cycle of this economic downturn.
As the economy worsens and job losses increase, more people are unable
to pay their credit card bills. Credit card issuers are raising rates
and penalty fees, pushing people who can least afford it deeper into
According to R.K. Hammer, banks will rake in nearly $22 billion in
penalty fees this year. But card issuers aren’t just punishing
consumers who pay late or not at all. Even people who have never missed
a payment are getting hit with higher rates and fees. While interest
rates have been falling in general, the average interest rate on credit
cards has climbed to 14%.
The banks say they need the revenue to offset record credit card
delinquency rates, but those higher rates and additional fees are
squeezing cash-strapped consumers, kicking them when they’re already
down and out of money. Many of the banks that are raising fees are also
the recipients of taxpayer money via the TARP bailout program,
including American Express, Bank of America, Wells Fargo and Citigroup.
That raises a sticky issue: Are banks who received TARP money
gouging some of the very same customers that gave them billions of
dollars in taxpayer bailout money? That’s a question that the TARP
oversight board, headed by Elizabeth Warren is trying to answer.
According to the Wall Street Journal,
Warren’s committee is investigating the lending practices of
institutions that received billions in public funds, following a rash
of complaints about increases in interest rates and fees. The TARP
money is supposed to be used to boost consumer borrowing, not crack
down on people already struggling to pay their bills.
What do you think? Let us know. And you can also send your comments to Congress, which is weighing several pieces of legislation that would limit card issuers’ ability to hike fees.
– Donna Rosato