01 July 2014
Obama Ready To Take On Credit Cards Companies
The Obama administration announced Thursday April, 23 2009 that they will be looking into credit card companies and trying to put in place some legislation that will help to curb some of the fine print, unannounced interest rate changes, and yes the biggest headache for many Americans, the high late fees that are charge to accounts with a payment due that is 3 times less that the fee charged. All we can say is that it's about time.
The credit card companies have been getting away with fees and other predatory lending practices for years, and yet no one had been complaining or voicing their opinions enough until now. Many people like to target payday loans as the most predatory lenders, but in fact it is the credit card companies that are doing things that some would call unfair or even misleading.
For example, a recent credit card bill came in and the amount due was $15. Unfortunately, I misplaced the bill and when I found out, it was already a day late. I called my credit card company to make the payment via my bank, but they had already charged me a $40 fee for being late and wouldn't take it off. I understand that I was late and don't mind paying the penalty, but the problem is that the fee is almost 300% more than the payment due, and my total balance was around $100, so this fee of $40 would be a 300% fee on my payment, and around 40% of my balance. Since payday loan critics like to use what if scenarios so much, less figure out what the APR is of this credit card if this was the case every month. My original balance of $100, would now turn into $125, with a $15 payment and $40 late fee, my balance would never go away and in fact, would increase by $25 dollars every month. By the end of the year, my $100 balance would now be $400 and yet I made payments of about $180. This means that even though I paid the balance of the card in payment, the actual amount increased and would have an annual APR of 300%.
Gee, doesn't that sound like the same terms that many critics try to use for payday loans, but in fact, those same numbers can be used to say the same thing about credit cards. However, credit cards are advertised on TV, people get them everyday and use them to pay for bills and other things all the time and are considered good forms of credit, when in fact they are no different than payday loans in the sense of their practices.
We are glad that the Obama administration has taken up the credit card debate and there will be some enlightening things coming out over the next few months as more insight is revealed about how these companies operate for a profit.