New Fee Added on Some Credit Cards
Approaching the enactment of the first phase of the Credit CARD Act next week, credit card issuers continue to make changes that could have a significant effects on consumers.
In September and October, some cardholders can expect more fee increases, some may lose reward points because of a late payment, and more cards will be introduced with high annual fees.
Although it was uncertain that issuers might make some of these changes, they are now starting to take place. To regain profitability, issuers are attempting to find new ways to generate revenue and regain profitability. Financial advisers recommend that households should pay attention to the white, non-descriptive envelopes in mailboxes and the stuffers in monthly credit card bills, as this is how issuers will notify customers about changes to their credit card terms.
A number of changes have recently been announced:
* Starting in September, American Express Blue and Blue Sky cards will cancel the points that cardholders earn in the month they have a late fee. Points are not available for redemption until the account is again in good standing, and the cardholder will pay an additional $29 fee for each month of points that they want to recover. (Note: in most cases, a consumer would have to spend $2,900 to have earned $29 in rewards.) Likewise, Citibank has added the canceling points policy, but has yet to add a reinstatement fee.
By retracting points, credit card companies could be adding new fees to the rewards programs, which could serve as a springboard for other fees to follow.
* American Express recently notified customers of upcoming changes that are being made in response to the current business and economic environment. It is raising the cash advance fee from 21.24% to 25.24% after October 1. The notice states that it was raising the APR on any balance that has a penalty rate because of a late payment. In addition to these changes, companies are increasing the late fee.
* United and Chase credit card services are offering new cards that may point to the future of reward cards. These cards target the “savvy traveler” who wants added comfort, more reward miles, and a chance to earn elite status more quickly. The annual fee ranges from $130 for United Mileage Plus Select Visa to $375 for United Mileage Plus Club Visa. While cardholders earn more for United purchases, they still only earn one mile per $1 spent on all other purchases.
Experts explain that in addition to the services by United and Chase, reward cards seem to be next in line to tack on additional fees.
* There is one positive change for some cardholders. Discover and American Express are eliminating the over-the-limit fees. American Express announced this will occur in October; Discover also said this will take place soon.