According to a survey by Consumer Action, it's becoming more and more expensive to use credit cards.
Consumer Action surveyed 117 cards from 74 banks and found "aggressive pricing strategies'' by card issuers. "This study is the first to reveal that in the last two years, banks have imposed penalty rates and significantly increased fees,'' said Stephen Brobeck, executive director of the Consumer Federation of America, a Washington-based association of more than 260 pro-consumer groups.
The study found the following:
1. Penalties are increasing. If a cardholder makes one late payment or exceeds his or her credit limit once, some issuers impose interest rates of up to 25 percent.
2. Late fees are increasing. Late fees have increased by 75 percent from three years ago.
3. Grace periods are decreasing. Some banks have shortened the period to make a payment without additional interest from 25 days to 20 days.
One change that, on the surface, appears to be in the best interest of the cardholder is the decrease in the minimum balance required. It was previously 4% of the outstanding balance, but now is just 2%. This means that cardholders have a lower minimum amount due, which increases their balance and thus their interest fees.
But, if cardholders don't like it, they can pay off their balance each month and avoid fees. According to Tom Kelly, spokesman for Bank One, (see GSQ issue November 1998). "There's a great deal of competition in the market. The consumer can shop around, get very good rates, and keep them by staying within the limits." Or, they could use their checkbooks!
