June 24, 2009
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News: Chase Raises Balance Transfer Fee to 5%
It's not likely that any individual or organization has gone untouched by the credit crisis and recession. As individuals struggled to meet the demands of daily needs, financial institutions encountered extensive credit card defaults. To compensate for their loss of earnings, lenders began raising credit card interest rates and imposing excessive over-the-limit and late payment penalties to open accounts. To make matters worse, banks began slashing credit limits to those customers that were keeping their accounts in good standing. Unfortunately, these practices caused more damage than good as more and more consumers fell delinquent and defaults continued to rise. In the fight against these unfair and deceptive practices, lawmakers passed the Credit Card Rights Act of 2009. In the wake of these limitations, financial institutions have begun to find other ways to squeeze profits out of consumers.
JPMorgan Chase & Co., one of the nation's largest credit card lenders, has announced that in August it will begin charging a 5% balance transfer fee. The 5% fee will be the highest charged by any of the major lenders. Chase justifies raising the balance-transfer fee on the increased regulations and loss of earnings resulting from the new bill. With the signing of the new law, financial institutions across the nation have warned that the new regulations would cause more harm than good by limiting credit availability, raising fees, and cutting credit card rewards. President Obama, however, is determined to inhibit any additional unfair practice such as this newest maneuver by Chase with his latest proposal of the Consumer Financial Protection Agency.
Experts say that Chase's actions have strengthened the argument in favor of the new agency. On the other hand, opponents say that credit card companies should have the right to assess fees to cover the costs of doing business. According to Chase, the fee increase will also affect cash advances. Additionally, Chase has changed its fixed interest rate to a variable rate. Although Chase has instituted these changes, it will not prevent them from offering temporary promotions for balance transfers at lower fees. Their actions do, however, indicate that consumers should expect to see more of the same from other lenders.