Good news for credit cards? Late fees are down

By , CardRatings contributor
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Late fees are down, according to a report on credit card reform just released by the Pew Charitable Trusts, a Philadelphia-based nonprofit.

Let's repeat that because, well, it's always nice to have good news. Late fees are down.

After the CARD Act

In the last two years, ever since President Barack Obama signed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, late fees have dropped, and in general, credit cards have become more consumer-friendly. According to the Pew report, interest rates have stabilized and the rules for credit cards are more transparent.

There was a lot of hand-wringing in the banking and credit card industries when these rules were going to be passed. I remember experts predicting a credit card Armageddon of sorts. Nobody would be able to get airline credit cards and small businesses couldn't buy inventory and rewards credit cards would soon be extinct, and in general, credit cards would become more difficult to get and more expensive.

However, according to the Pew report, that hasn't been the case, which, frankly, should make execs in both industries quite happy. After all, easier access to credit and more manageable cards should translate into more consumers using them and more profits. Everyone should be pleased with this news.

In any case, the full report, "A New Equilibrium: After Passage of Landmark Credit Card Reform, Interest Rates and Fees Have Stabilized," can be found here, but if you just want the highlights, read on. All information was culled from the report or the related press release.

Credit card rates and fees

  • Interest rates, on average, have held between 12.99 and 20.99 percent. Bank cash advance and penalty interest rates also didn't budge from 2010 to 2011. Meanwhile, credit union purchase rates slightly increased and cash advance rates dropped.
  • Overlimit penalties "have all but vanished," according to the press release. "Only 11 percent of bank credit cards now include them, while the largest credit unions have eliminated them entirely."
  • Late fees still are alive and thriving, but their costs have gone down, thanks to the law mandating that first-time late fees be no more than $25 in most situations. If consumers are late again within the next six months, the highest late fees can run is $35.
  • Annual fees haven't moved much. Last year, about 14 percent of bank and credit union credit cards had annual fees. This year, that number remains at 14 percent for credit unions, while increasing to 21 percent for banks. Meanwhile, average annual credit card fees remained stable at $59 for banks and $25 for credit unions.

Word to the wise

The downside to late fees being down? Credit card companies aren't making as much money from late fees anymore. This likely means they will be busily working on ways to make up the shortfall by introducing other types of fees. If you've just been tossing out those inserts that come with your credit card bill, it might be a good time to start reading them more closely so you don't get surprised by a new or increased fee.




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