Credit Card Late Fees Climbed 26% Since 1995

By Kathy Bibeau

Credit cards have become a way of life for most of us and it is important to become aware of the many hidden traps that credit cards can contain which we may not be aware of if we don't read the fine print. Though it is true that competition among credit card companies have lowered the interest rates on many cards, many banks are offsetting this decrease in interest rates by contriving to increase other fees and create new ones.

To avoid finding yourself making payments over and above your interest rate be sure to read your credit card agreements carefully, and those notices that come in the mail stating any changes in the companies practices.

While the survey found that the average interest rate dropped from 15.4% in 1995 to 14.8% in 1997, the average late fee has jumped from $13 to $16.50 - a 26% increase in just two years. In addition, many banks now asses late fees much earlier than they did before. Some companies charge a late fee when the payment is only one day late. This means that if your payment is held up in the mail then you could find yourself paying dearly for it.

Higher charges are also being assessed for over the limit fees, some as high as $20 -$25. The cost for cash advances has also risen 5.5% since 1995.

But most detrimental to the is the introduction of new kinds of charges. One of the most outrageous examples is the Advanta card, which may impose a $15 charge for every six-month period in which the card isn't used and a $25 fee when the account is closed.

In addition many banks have recently announced that they will charge a fee for inactive accounts or waive existing annual fees if customers meet certain use requirements. For example, Nations Bank said it would charge a $19 annual fee if the card is not used at least three times per year. Columbus Bank and Trust will waive its $25 annual fee if the card is used at least six times a year. And other banks say they will now charge a fee if the consumer does not pay at least a minimum amount in interest per year.

If you own credit cards it's important to keep in mind that credit card companies love the card holder who carries a balance and makes only the minimum monthly payment. This is how they make their money. And if they can't make their money this way then they introduce these new charges that penalize those of us who are trying to use credit cards responsibly. So you may wish to check out that fine print on your credit card agreement or check closely before you sign up for a new credit card. The more information you have the better able you are to protect yourself from the credit card wars.

Editor's Note: Much of the information contained in this article is from Consumer Action. Consumer Action is a 501(c)(3) non-profit advocacy and education organization that produces educational publications, provides nonlegal advice to consumers and participates in legislative and regulatory processes.

At the American Spirit Newspaper we are glad to be able to publish information which will help the consumer have better information on which to base their financial decisions.

If you are interested in more information from Consumer Action you can call their consumer hotline from 10 a.m. to 2 p.m. weekdays at (415) 777-9635 in northern California, or (213) 624-8327 in southern California or write them at:

Consumer Action
116 New Montgomery St., #233
San Francisco, CA 94105

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