Credit Card Companies Often Change Their Terms

Can Card Interest Rates and Card Fees be Amended at any Time?

May 10, 2009 Asa Ghaffar

Most credit card companies have drafted T&C's that work to the detriment of US consumers. The majority of card interest rates and card fees can be changed at any point.

According to Demos.org, between 1989 and 2006, the cumulative credit card charges paid by US consumers increased from approximately $69 billion to more than $1.8 trillion a year. Whilst many card fees can be attributed to missed and late payments, others come from not checking the credit card companies T&C's (terms and conditions).

Why Credit Card Companies Offer No Annual Fee Credit Cards

Credit card companies are more likely to offer a no annual fee credit card because their market research tells them it is popular with consumers. According to an Aite Group survey in January 2008, 64% of respondents said that 'no annual fee' was the main reason why they chose their current credit card.

According to a Consumer Action credit card survey in July 2008, it was found that 85% of credit card providers provided a no annual fee credit card. In 2007, this figure was only 72%. Those that did charge an annual fee charged between $18 and $79.

Credit Card Companies and 'Hidden' Card Fees

US consumers don't like to pay an annual fee, but often fail to realise how much extra money they pay in hidden or non-guaranteed fees. According to Pew Safe Credit Cards Project, a total of 92% of providers included a card fee for exceeding the credit limit. The average credit card charge was $39 on the majority of accounts.

Credit Card Interest Rates can be Amended

Pew Safe Credit Cards Project found that 93% of cards have T&C's that permit the issuer to raise credit card interest at any time. The subprime credit crisis has meant that many credit card companies have increased interest rates for those deemed 'higher risk'. According to a recent article in the Daily Telegraph, more than half a million Egg credit card customers saw their APR rise by up to 5%.

Other Potential Surprises in the T&C's of Credit Card Companies

72% of credit card companies offered consumers promotional rates that issuers can revoke after as little as a single missed or late payment - Pew Safe Credit Cards Project, March 2009.
77% of credit card companies answered yes to the question: "Can you increase my APR (card interest) or change my terms for any reason?" This figure includes all top 10 providers.
25% of surveyed students said that they had paid a card fee for late payment and a further 15% had paid one for being 'over the limit' - U.S. PIRG: Campus Credit Card Trap.
The Bank of America, Chase, Citi, Digital FCU, HSBC Bank, Town North Bank, U.S. Bank and Wells Fargo all charged a 3% transaction fee on purchases made in a different currency - Consumer Action credit card survey, July 2008.

It is essential for all US consumers to understand the 'main' T&C's of their credit card provider. There is no point in signing-up for a card offering a promotional rate when incurring card fees for late payment if the offer is subsequently revoked for non-compliance.

Readers that found this article useful may also be interested in identifying the best credit card deal, discovering how effective credit card debt settlement is or finding out how to avoid identity theft.

Sources

Woolsey, Ben and Schulz, Matt. (April 29, 2009). "Credit card statistics, industry facts and debt statistics." CreditCards.com

Butterworth, Myra. (February 10, 2009). "Egg increases interest rate on credit cards by up to 5 percentage points." The Daily Telegraph

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.

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