Now that Congress has passed the Credit CARD Act, credit card companies are expected to lose somewhere between $ 5 and $ 15 billion in potential fee revenues. Banks are responding by coming up with new ways to compensate for the income they have lost through credit card reform. They create new fees and raise interest rates to make money from the financially tied consumer. Here are 5 new tactics that credit card companies use to increase their revenue. Do you also feel free to check how the new credit card legislation will affect you?
Variable interest rates
Since the Credit CARD law has been passed, many card companies cannot raise the interest on new cards in the first year. To circumvent this law, credit card companies are switching from fixed-interest cards to cards with variable interest rates. Variable rate cards are linked to the prime rate and can increase at any time. The average credit card with a fixed interest rate has an interest rate of 13, 4%, while the average variable rate has a rate of 13, 7%. As the prime rate rises, many customers will face higher interest rates. Customers with low credit scores can be forced to pay interest as high as 35% in the coming years.
According to Bankrate, 35% of the new credit cards offered receive an annual fee. Annual fees range from $ 29 to $ 99 on new credit cards. Reward cards charge annual fees from $ 300 to $ 400. Current cardholders do not escape the anger of card companies. 20% of current credit card customers pay an annual fee, and this percentage is expected to rise dramatically in the coming years. Citi Group hit cardholders with an annual fee of $ 60 last month. American Express and Bank of America have also collected customers with annual fees oFrankensteinangs.
Are you one of those people who often do not use your credit card? You are about to get a shock quickly, because card companies hit disciplined credit card users with inactivity costs. But don’t worry, you can escape these annual fees just by asking for more! For example, if you spend more than $ 2,400 a year with Citygroup, no inactivity fees will be charged. This is ridiculous! People will be forced to spend $ 2,400 plus any interest to save $ 60.
Prepare for a fee for each transaction where you receive a paper statement. Do you want a specified statement? That will cost you. Companies now charge fees for annual statements, monthly paper statements and all mailings. These costs range from $ 1 to $ 5 per deposit. Applying for a credit card is also not free. Companies have begun charging application fees regardless of whether you are approved for the card or not.