Find the best credit card offers online.Credit card companies have been under fire lately for a number of questionable and downright predatory practices. One particular practice that has Representative Barney Frank in an uproar is overdraft fees.
Credit card companies have the habit of automatically enrolling their credit card holders to overdraft protection programs. An overdraft protection program allows a credit card holder to charge beyond his or her credit limit. This is particularly useful when a credit card holder isn’t aware that he or she is nearing his or her credit limit and uses his or her card for a purchase which would go over the card’s limit. At the counter, either one of two things could happen: the cashier can deny the purchase or approve the purchase with the approval of the issuer of the card, of course. For most modern credit cards, what would happen is the latest. While that may sound like the credit card companies are doing card holders a favor, they are not.
When credit card companies allow a card holder to charge beyond his or her limit, they charge overdraft fees. They aren’t small fees either. They average at $35. Credit card companies argue that they are providing a useful service with their overdraft protection program (and the resulting overdraft fees). They say that it is a form of convenience for a card holder, one which saves them from the embarrassment and annoyance of having their purchases denied at the cashier. Consumers argue that they would rather have their purchases denied than having to pay exorbitant fees.
As House Financial Services Committee Chairman Barney Frank puts it, “We wouldn’t be in a situation where we’re considering legislation if you would have had an opt-in regime from the beginning”. He also added, “Don’t do people favors without asking them”.
Frank is very much against the practice of charging overdraft fees. He’s not the only one either. Representative Carolyn Maloney of New York is also against it and has sponsored a bill which is already under consideration in the House, which would stop credit card companies from levying more than one overdraft fee per month and further limits overdraft fees to six per annum.
According to Maloney, if the bill passes overdraft fees will be under the Truth in Lending Act. This means that credit card companies would need permission from credit card holders before they are enrolled in overdraft protection programs. They would also be prohibited from rearranging the order of the transaction postings to specifically trigger overdraft fees. Finally, overdraft fees would have to be in proportion with the actual amount that goes over the limit.
