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It is a known fact that late card payments will attract penalty- but just how much? It is the same with card fees also. In spite of the new card reforms more than half of the cards fail to disclose the penalty charges as well as the fee charged by them. There seems to be very little transparency with regard to these charges. While penalty rates could be as high as around 29.99 percent, this is over and above the $39 late payment fee. Card companies are supposed to comply with the fresh laws that prohibit deceptive practices. However, as per the study conducted by the Pew Safe Credit Cards Projects have found that issuers do comply with the new laws whereas earlier on each issuer practiced at least one thing that was illegal.
Card major such as Cap One and Chase disclose the penalty charges whereas, the Bank of America does not disclose the same. Bank of America is one of the largest issuers and it accounts for at least 50 percent of the cards at present (as per the study done by Pew Safe cards project). As per the Fed regulations, only set penalty rates were to be disclosed in marketing materials. However, Betty Riess, spokesperson, Bank of America, states that the bank does not follow any set penalty rates and instead flags accounts that are 60 days past the due date for a review. The rates are not predetermined, she stated. Instead, Bank of America will hike the rate after a 45-day notice period to the client. This was in accordance with the existing law she said.
The 45-day notice period is mandatory as per the new regulations after which new rates could be applied on fresh purchases. This notice period would give the customer enough time to either stop usage of the card as well as clear off pending balances on the card and close accounts.
Another route that one could take to avoid penalty rates would be to make six consecutive timely payments in order to boost the credit rating a bit. However, banks could continue to impose penalty if payments are delayed.
The study also found that there were other costs that were on the rise too. Balance transfer fees have also risen from 3% to about 4% since the middle of last year.
For cards that have annual fees, the median fee has gone up from $50 to $59 and median interest rates have risen to about 21%. The only good news is that over limit fee is less common now.
