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There is no escaping the killer fees on cards

[Tuesday, November 23rd, 2010]

There was a time, when not so long ago banks thrived on the fee they charged their clients and were thriving on that. But ever since the card act was passed things became much more difficult for banks and they had to find ways and means to churn out profits. The credit card act literally clipped the bank`s wings and strict rules with regard to the penalty rates that banks could impose caused a serious dent with respect to the bank`s earnings.

As per the existing rules there are limits on how much the banks can increase with regard to the interest rates and the circumstances under which they do so on the existing clients. The bank has to give the client a 45-day notice period before increasing the interest rates. The bank can no longer penalize card holders for not using their cards like it was done earlier. There is a cap on the late payment fee also (around $25) and the bank can`t charge in excess of the amount that is fixed. Banks can no longer burden customers with overdraft fees and must get the permission before billing for any shortfalls.

But the nightmare is far from over for customers as there are new fees and charges that have come into the fore and seems to be getting past the new laws that are in place. The 3 major concerns are the present balance transfer fees, the annual card fees, as well as the bank`s service fees.

Earlier banks offered freebies such as free foreign ATM withdrawals, free checking and other such facilities. But now these freebies are offered only to the VIP`s and not to everyone. All the major banks have issued caveats in order to qualify for banking which is free of fees. This includes having a minimum balance in the accounts and changes in direct deposit requirements as well. Failing which, a fine of around $5 to $30 could be levied each month.

Almost all cards which offer freebies and reward points charge a hefty annual fee and this negates the points earned or the money saved by using the card. AmEx alone collects more than a couple of billions in annual revenue.

Balance transfer fees are charged while moving the balance from one card to another. Balance transfer fees are always based on a percentage of the balance that needs to be transferred onto the new card. However, by reading the fine print and following a few tips one can ensure a better deal with the bank.

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