November 12, 2009
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How CC Companies Are Exhausting Americans, Pt.3
Slashing credit; fees, fees, and more fees.Most lenders have slashed credit limits with little or no warning. Equity lines of credit that have a credit card attached to the account have been hit particularly hard. Lenders cut or closed off lines of credit as a result of the breakdown in the housing market; as home values decreased, equity decreased. In most cases, consumers were given no notification that their lender was shutting off their line of credit. Lenders also slashed credit limits of a large number of sub-prime credit card accounts. These accounts tend to be high risk and contributed to the highest amounts of credit card defaults. Some of these accounts have remained inactive for a period of time.
Cash advance interest rates and fees have increased across the board. If you are in the habit of using your credit card at the ATM to obtain cash, you will want to check what it will cost you in the long run. Most of the cash advance fees are 2 or 3 percentage points higher than the already high interest rates. You can easily check what your credit card company is charging you for using that ATM machine by looking at your account statement or calling your lender's customer service department.
Balance transfer fees are also going up. At one time, the average balance transfer fee was 3 percent. Today, most lenders have raised that to 5 percent. Again, calculate what that zero or low interest rate will end up costing you after you have calculated and added in the balance transfer rate. It could end up costing you more in the long run. Another biggie is the re-invention of the annual service fee. Most credit card accounts that offer some sort of reward system will now be accessed an annual service charge. These annual fees range from $35 to more than $300 a year; the greater the rewards, the higher the fee.