March 12, 2010
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New CC Regs -- Fees & Penalties, Pt.1
Fees must be legit & reasonable.This article series is intended to be a more comprehensive evaluation of the portion of CCARDA regs introduced in the news article entitled: "New CC Regs - A more-level playing field". Please refer back for the basic overview. As I mentioned in that primer, the intent here is to help us credit card consumers to avoid those ugly surprises. It will still be a challenge to ensure the scoundrel element doesn't skirt the purpose of our new provision of credit card consumer protections. They are only now being implemented. Expect some rough spots. There will always be some large credit card issuers with challenged scruples that will look for loopholes. Leave it to the shysters to find ways to skirt out protections. Their purpose will always be to squeeze more money out of us in any way they can. This article covers one of the hot topics now being contested in the media everywhere. That is the topic of the dreaded fees and penalties.
As was mentioned before, just the credit card penalties alone which were imposed on us by the credit card banks have allowed their profits to soar from $11.7 billion in 2003 to a double $22.9 billion for last year alone. One of the largest abuses comes down to what started out as a gesture to "do us all a favor".
Years ago during the fledgling days of the credit card industry, there were a few wealthy people who were embarrassed when their credit card transactions were denied for insufficient option-to-buy levels (the current amount left available from the credit limit).
When these few (but important) credit card consumers complained to the banks about this the banks, in turn, complied with a premium feature. For a few dollars more (a fee), these people could enjoy the privilege of having the transaction go through anyway, even though it would mean exceeding the option-to-buy level and go over the remaining credit on the card. It didn't take the banks very long to discover that there was much profit to be made by this gesture. So, out of the goodness of their hearts (I'm sure), they extended this privilege to everyone but they also made it mandatory. Eventually it took on the name "exceeded limit penalty" (or as the industry likes to call it in fine print, "Overlimit Fee").