Find the best credit card offers online.Credit card companies are once again facing legislation for their credit card practices. This time around, it’s for overdraft fees.
It is a common practice for credit card companies to charge overdraft fees whenever a credit card holder charges in excess of his or her available credit. Back when credit cards were still a new concept, charging over a credit card’s limit was not allowed and the transaction would be denied. However, as credit cards became mainstream, credit card companies saw the potential profits of charging overdraft fees instead. Thus, credit card companies began defaulting to charging overdraft fees instead of denying transactions whenever a transaction would go over a card’s limits.
Credit card holders, consumer advocates and, recently, lawmakers see overdraft fees as too predatory, especially in a time when consumers in general are facing great financial difficulties. The practice of charging overdraft fees, credit card companies argue, is a form of protection for credit card holders. Instead of having their transactions denied at the cashier, potentially causing embarrassment and inconvenience, card holders would be allowed to continue with the transaction – for a fee. Credit card companies, however, automatically enroll their credit card holders to overdraft protection, a misleading practice which has found many card holders surprised with receiving large overdraft fees merely for not keeping track of their credit limits.
Now, Senate Banking Committee Chairman Christopher Dodd and four other Senators have introduced legislation, which would restrict the fees that credit card companies can charge on their clients. In particular, credit card holders would specifically have to apply for overdraft protection. The amount and the frequency of the fees that credit card companies can charge would also be limited as well.
This comes as credit card companies continue to follow aggressive tactics, such as raising interest rates and fees, for profiting from their consumers. Lawmakers have expressed their continued frustration over such practices from companies, which benefited greatly from the government’s financial intervention early this year.
In a statement, Senator Dodd said, “Banks should not be trying to bolster their profits at the expense of their customers”.
Last September, major U.S. financial institutions Bank of America, Wells Fargo & Co. and J.P. Morgan Chase & Co. announced a roll back on overdraft fees in an apparent attempt to placate the growing resentment over overdraft fees.
The coming legislation is going to do more than that, however. Specifically, the legislation will require credit card companies to charge fees that are reasonable and proportional to the actual cost of overdraft processing. It will also place a limit on the number of fees that may be charged for every year and month.
