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New Federal Rule Caps Credit Card Late Fees at $8
- dkjaudyeqooe 3y agoTo give non US people some idea they can run to around $40 right now.
- cosmotic 3y agoI'm in the US and I was looking for that information too, thanks
- AH4oFVbPT4f8 3y agoI'm in the US and my neighborhood HOA said they didn't receive my check for $500 and charged me $50 for a late fee plus interest of $4.17.
- muttled 3y agoIs that monthly?!
- AH4oFVbPT4f8 3y agoLuckily no, it’s every six months
- aidenn0 3y agoSomewhat of a tangent, but I never miss an opportunity to tell the story of why I will never use a credit card from Citi. Circa 2000CE: I was in college, living in the dorms. The person working in the mail-room at the dorms was somewhat unmotivated, leading to mail often ending up in the wrong mailbox. Sunday night, someone gives me a Citi card bill that is due on Tuesday. Monday morning, I call customer service and let them know the situation. I will mail them a check before the due date, and I would like to get a grace period on the late-fee and interest. CS rep informs me that they cannot do that, but can do an electronic funds transfer from my checking account for a $10 fee. I was rather astonished at this, and told them to do the EFT and cancel my account. I should note that Discover (my other credit card at the time) and my next major credit card (95% certain it was Chase) both encountered similar situations and handled it reasonably.
- yieldcrv 3y agoAm I understanding that you’re holding a grudge for 20 years because of a breakdown in delivery for an antiquated communication method, one that wouldn't be used in your socioeconomic class to handle finances any longer because citi was inflexible then? inflexible to a financial woe you would also never encounter in your subsequent post-college socioeconomic status for decades? I’m asking because I didn't completely understand the story
- xboxnolifes 3y agoYou're using a lot of words to say: "They avoid Citi because they gave them bad service".
- oarla 3y agoNo, it's because they charged a $10 fee to move money from a checking account(at the same bank) to credit card account. That is just ridiculous! There should be no fees to move money between your accounts at the same bank.
- yieldcrv 3y agoah, that I agree with, I'd be mad about that too on top of potential late fees and interest
- abawany 3y agoCiti is usurious. I once made a mistake in the payment by entering a slightly smaller amount than the balance - I detected the mistake after the due date and sent the remaining balance that day. I was still charged interest for 2 more payment periods, which their CS stated was in the card terms (I confirmed) so she couldn't do anything.
- eu 3y ago[flagged]
- trey-jones 3y agoI'm not sure what to take from this. It makes it less punishing to not make your payment on time, but is that a good thing? If you make this a habit, you will eventually end up spending more on interest than you do on groceries... On the other hand, "You don't have the money to pay us, now you owe us more money!" is always kind of an interesting dynamic, on the order of "the beatings will continue until morale improves." I'm not saying that this is a bad thing, just that it doesn't seem like a huge win for consumers. My bias is that this is not something that I deal with often (being late on CC payment).
- ars 3y agoThere are a lot of people who always run balances, so interest is always accruing. It won't change a whole lot for them in that regard. There's probably people on the margin will will pay late, then be hit with interest. Or they'll be late and cancel their no-interest grace period. Banks are complaining about this, but I think in the net their income won't change all that much. They'll probably also rates rates slightly, and/or make penalty interest rates more common, or stricter.
- aaomidi 3y agoWhy are we punishing people for being poor again? Stick with the interest fee. Late fees make absolutely no sense
- matchbok 3y agoThen don't use a credit card. Simple.
- aaomidi 3y agoAlternatively: I live in a system where I can have government reduce the power of companies. I’ll do that instead.
- matchbok 3y agoThis isn't reducing the power of any company. The money and fees will be shifted around. This accomplishes nothing other than encouraging people to rack up more debt.
- ars 3y agoInterest rates will go up so that they will end up making the same amount of money, just from slightly different people. Another possibility is penalty interest rates that kick in if you are late.
- odyssey7 3y agoImagine the horror if credit card companies stop being able to offer premium airport lounge experiences and free travel to their wealthiest customers by means of the late fees they charge to their most marginalized.
- ars 3y agoThat's not a thing. You are horrified at something that doesn't exist. If a credit card company offers this kind of perk it's because that customer gives them enough profit to make it worth it. It's simply not a thing to lose money on a wealthy customer and make it up on a poor one. That's would be a pretty poor business. (In general those kinds of cards have annual fees in the thousands of dollars.) And what makes you say it's "their most marginalized" anyway? Is there something about being poor that makes people forget to pay a bill? Like I understand carrying a balance if you are poor, but forgetting to pay is just a human thing. If anything these lower fees will be worse for them. Instead of a late fee that anyone might experience, the interest rates will go up, and those are paid mainly by the ones least able to afford it.
- odyssey7 3y agoI take it that you’ve never been paid late while living paycheck to paycheck? No, it’s not just about forgetting to pay the bill on time, and in many cases the interest rate is already the highest one that’s legally possible. When high-status people conspicuously consume through Birkin bags and exclusive club memberships, a lot of other people are led to desire those things. In the case of credit cards, not only is demand drummed up by enlisting wealthy people as card-carrying brand ambassadors who flash their membership card every time they approach a cashier, it also distorts the perception of incurring debt for everyday purchases into something that financially savvy people are doing. Your analysis is kind of correct if you entirely ignore marketing and psychology.
- endisneigh 3y agoWhy even have late fees at all? You're already paying interest.
- _heimdall 3y agoYou aren't paying interest if you never pay the bill. Late fees create a predictable minimum payment that credit card companies can account for and create incentives for consumers to keep spending more under control. Consumers may not realize or care how much their total debt is growing if they could charge their CC without having to pay a certain amount relative to the total debt.
- endisneigh 3y agoIf they don't pay the bill why would they pay the late fee?
- bombcar 3y agoIf you miss a payment, you can make the payment and the late fee within 30 days and nothing hits your credit record. Various fees like that are "allowed" to be added on when you start going delinquent, and get the amount total owned much higher. It's basically usury, in all senses of the word.
- endisneigh 3y agoI understand that it's allowed. I'm wondering why not simply eliminate them since from the article they are trying to eliminate junk fees.
- bombcar 3y agoI suspect the banks were able to mount some form of "it actually costs us X" argument, which might even be understandable if you take into account mailing late notices, etc. Easier to get them to swallow a limit than a complete removal (which could come later).
- _heimdall 3y agoI'm always a bit annoyed by the need for new rules and legislation similar to this. If consumers aren't willing to risk paying late fees, just don't use credit cards. They are a convenience product at best and a predatory lending mechanism at worst. There are benefits to credit cards, don't get me wrong, but they aren't a must and we can choose to live without them. Why do we need yet more government intervention to solve this? How does the government actually land on $8 as a universal, reasonable late fee? Do they known what collections actually costs, or should cost, credit card companies? Do they know what every consumer would deem a reasonable fee? And more importantly, do they know that credit card companies won't recoup this amount through some other means, say by slightly higher rates to consumers or merchants?
- yurishimo 3y agoThe credit card companies are still free to charge interest at the agreed upon rates, but now they can’t add a $50 fee on top because of what is a banking error for most people (they had the funds but perhaps in a different account from the autopay). If this change actually affects the companies bottom line, I would imagine we will see a small increase in the interest rates being offered to cover the expense. Realistically though, banks make all of their money from the interest on the cards and the late fees are icing on the already overflowing extravagant cake.
- _heimdall 3y ago> Realistically though, banks make all of their money from the interest on the cards and the late fees are icing on the already overflowing extravagant cake. Standard accounting principles make it much more black and white. The banks' financials already account for late fees taken in. Removing the late fees alone would decrease revenue and hurt financial projections. They either eat this out of the kindness of their hearts, or more likely find other ways of taking a similar amount of money from customers or merchants.
- deleted 3y ago[deleted]
- aaomidi 3y ago
- wolpoli 3y ago> [Lindsey Johnson] added, “By normalizing being late on credit card payments, the administration is knowingly putting consumers’ financial health at risk.” It's interesting that they are not at all concerned about the interest on credit card balance putting consumer' financial health at risk. For consumers at risk, the interest charge is far larger than the late fee itself anyway, which means the late fee is just gravy on top.
- dheera 3y agoCan we just do something about taxes? People would be able to pay for stuff if the government didn't steal so much of their money. After the recent few years of inflation middle class is now subject to higher tax brackets than ever, and poverty class is being taxed at almost 30% if you include some states' state tax. Then there are property taxes which should be abolished, or else landlords just pass them onto renters, which means poverty class now pays the taxes of the rich.
- throwway120385 3y agoThe world is a lot more complicated than you're making it out to be.
- chiefalchemist 3y agoIs it? The government wants to persist and history shows it/they will do what it can to do so. Whether that's direct taxes or other means of financial manipulation (e.g., printing more money), govs do whatever it takes to avoid chaos and persist.
- op00to 3y agoThat’s literally why I pay my taxes. To avoid chaos.
- chiefalchemist 3y ago
- briHass 3y agoIt's not like this type of feel good legislation actually changes anything with the card issues. They'll just bump interest rates a few fractions of a percent or tweak one of the other knobs they have to extract rent from merchants. There's some irony in the government pushing legislation limiting a penalty for breaking an agreement, when they have no problem imposing all sorts of high fees if your taxes or parking/speeding tickets are late.
- tamaharbor 3y agoThe banks will make up for this loss of revenue somehow. Maybe they will spread it out among customers that have not been late. That appears to be the democratic way.
- gnopgnip 3y agoThey are already charging as much as the market will bear
- TuringNYC 3y ago>> They are already charging as much as the market will bear As Telcos discovered, they only advertise a base price. If you ask for the full price you'll owe, they wont tell to you. You'd need to be a lawyer and read the 15 pages of fine print to figure it out. Then, you get stuck in a 2yr contract, get the first bill, and discover all sorts of things like the "Regulatory Recovery Fee" and the "Emergency Surcharge"
- gruez 3y ago>As Telcos discovered, they only advertise a base price. If you ask for the full price you'll owe, they wont tell to you. You'd need to be a lawyer and read the 15 pages of fine print to figure it out. Source? While I agree the advertising doesn't prominently display the all-in price, claiming that you need to be a legal professional to figure it out is a bit hyperbolic.
- anotheruser13 3y agoAlmost makes me long for the days of Earl Scheib's "I'll paint any car any color, no ups and no extras".
- caturopath 3y agoThey aren't suggesting they'll charge appreciably more; they are suggesting they'll charge the same in different ways.
- 3y ago
- grecy 3y agoWhy is there a fee for carrying a balance and paying interest on a credit card? I've never heard of that, and certainly have never paid a fee for that (not in US). Credit Card issuers like it when people pay interest... because that's how they make money. It seems charging a fee is counter intuitive because you're incentiveizing consumers to pay their card off in full and never pay interest, thus making the issuer less money.
- exabrial 3y agoI mean, ok... I guess... but just seems like this a bit of regulatory overreach. There's a lot of alternatives to credit cards available, just seems like a very random hill to die on.
- asadotzler 3y agothe water selling company is dumping shit in our water! i mean, i guess you could drink from the creek or the sewer.
- ValentineC 3y agohttps://archive.ph/07zHH https://archive.ph/07zHH
- babyshake 3y agoMore important, in my opinion, is autopay should generally be opt-out rather than opt-in. That is to say, you should provide your funding source when opening the account and some manual action should be needed on your part to decide to pay less then the balance automatically. It would be reasonable to allow you to choose between the minimum and full balance, but I've experienced some dark patterns making it difficult to setup autopay, and autopay setting "mysteriously" resetting by themselves. Banks should have zero incentive to make being responsible more difficult than it already is for most people.
- tacostakohashi 3y ago> Banks should have zero incentive to make being responsible more difficult than it already is for most people. Presumably interest should be banned as well?
- mlyle 3y agoI read your comment as trying to troll/lampoon him. There's times where banks seem to deliberately screw your payments, etc, up. There's no sane legal regime where they should make paying your balance artificially difficult. Of course they should be able to charge a reasonable amount of interest for the use of credit.
- fnordpiglet 3y agoI’d note that compounding interest is already a “late fee.” The longer you hold the debt the larger it becomes, exponentially. In a meaningful way late fees are double dipping.
- vanchor3 3y agoThere's a difference between "paying interest because you didn't pay off your entire balance" and "paying a $40 late fee because you forgot the payment was due at 10:59AM Eastern Time and you were an hour late".
- deleted 3y ago[deleted]
- alxmng 3y ago[flagged]
- Nifty3929 3y agoSeems like this will force credit card issuers to reduce their business with people who are likely to default, especially on small balances and spending patterns. So basically lower income people will have less access to credit cards. Possibly better for them TBH, but I still don’t like it.
- Sparkyte 3y agoSecured credit exists for a reason. You can get one within your means and the collateral is what you put forward on it. When I was a young adult I got myself a secured credit card.
- copperx 3y agoThe premise has always sounded ridiculous. You're paying the bank so that you can loan money to yourself. To be more accurate, you're paying the bank so that they can be a witness to you loaning money to yourself. The sole purpose of that insanity is to increase your credit score, is that correct?
- Riseed 3y agoYes, they're commonly used as "starter" credit cards, to increase credit score. I presume they also come with the other benefits of a credit card, such as the amount of security deposit required when renting a car, as well as fraud and chargeback liabilities and timelines.
- Nifty3929 3y agoI've never used a secured credit card, and I'm with you that it seems ridiculous. But I think a more honest question is: Why do people do this? I'm willing to give folks the benefit of the doubt for being smart and rational. So genuine question we should be asking ourselves (or them): What is the appeal of a secured credit card? Is it really just about the credit score?
- tintor 3y ago
- caseysoftware 3y agoBased on credit card balances being at all time highs and more people being behind again, will this make a real difference or just delay the inevitable? Ref: https://wjla.com/news/local/loans-credit-debit-card-bank-account-high-intrest-money-federal-reserve-lower-rate-save-money-financing-delinquency-consumers-lower-income-households-stimulus-relief https://wjla.com/news/local/loans-credit-debit-card-bank-acc...
- anonuser123456 3y agoCredit card balances are up in nominal terms even when credit growth hasn’t happened. Throw in income growth and it shouldn’t surprise people that credit card debt is up.
- ThunderSizzle 3y agoThere hasn't been real income growth in the last 3 years. Inflation wiped all of that out, and credit card balances are as high as ever.
- paxys 3y agoIf you are adjusting wage growth for inflation then why not credit card balances as well?
- odyssey7 3y agoIt’s good that this arrives at a time with downward pressures on housing costs (I think?), because otherwise these savings wouldn’t stand a chance against being gobbled up by rent increases.
- keiferski 3y agoIt’s so odd to me that predatory credit card rates are just an acceptable thing, and that there is basically no widespread political movement to do anything about it. Most people don’t even know what usury is and the ethical history of that concept. Why is it even legal for a card to have 20-30% interest rates? The answer is probably, “because people with credit cards spend more money, even if they are borrowing that money, and that’s ultimately what the decision makers really care about.”
- standardUser 3y agoIt used to be much worse before the Obama-era "Credit CARD Act of 2009". Some highlights from the law: - Credit card companies have to give consumers at least 21 days to pay from the time the bill is mailed. - Credit card companies must give consumers at least 45 days notice if their rates are about to go up. - Credit card companies must apply payment amounts "in excess of the minimum payment amount" to a consumer's highest interest rate balances first. Banks used to break all of those rules with abandon. https://en.wikipedia.org/wiki/Credit_CARD_Act_of_2009 https://en.wikipedia.org/wiki/Credit_CARD_Act_of_2009
- keiferski 3y agoFrom quickly researching this, it used to be much more restricted until the 70s and 80s, when a lot of deregulation took place.
- prewett 3y agoAs I understand it, the interest rate used to be capped at something like 10%, but when the base interest rate rose above/near that, many people couldn’t get credit at all (why offer unsecured credit, which is high-risk to the lender, if you can’t charge the necessary premium over the risk-free rate).
- exogen 3y agoAt the risk of only being tangentially on topic, I want to recount a story about how sleazy financial institutions will be with their fees if given the opportunity. This happened to me with Fifth Third Bank; I knew it was sketchy as hell and it infuriated me at the time. On several occasions I would overdraw my debit account, notice the issue and deposit money, and then continue to make purchases with the newly available funds. Despite having sufficient funds, at the end of each day, Fifth Third Bank would reorder the day's transactions to maximize the overdraft penalties, as if all of them had been settled while overdrawn. Their customer support team would pretend this was actually beneficial to customers and launch into a nonsensical explanation where one of the terms involved was, literally, "the matrix." So you'd be sitting on the phone in disbelief as they talked about "the matrix." Anyway, there was eventually a class action lawsuit over it. Ever since then, my inclination is to regulate the hell out of these sleazy institutions. They clearly can't be trusted to act in good faith.
- PH95VuimJjqBqy 3y agothat's illegal in the US, if they're doing that in the US report them. That stopped being legal in the late 90's.
- infinitedata 3y agoIt is not about the fees, it is about making you feel responsible. The average Joe will now not care about balances, amass them in collections, bad credit, and ultimately bankruptcy.
- gnrlst 3y agoI saw more than one post about people maxing out credit cards to go long on Bitcoin or other crypto, ALREADY anticipating they will not pay back those cards and just go to collections to pay back 30-40 cents on the dollar. It's like it's become the norm to default.
- dartos 3y agoI have not heard of that since 2020. Not sure it’s the norm
- 360MustangScope 3y agoDoes your credit really matter after you have a car, house and everything you want? If you default and pay collections, it drops off your credit in 7 years… just in time to buy a new car that would need credit. If you really need to declare bankruptcy, then that also drops off in 7 years. I knew a coworker that amassed 100k in credit card debt, declared bankruptcy and then in 2 years he had credit cards again from the SAME creditors. Even go a car loan and mortgage shortly after that.
- howard941 3y agoBankruptcy drops off in 10 years, not 7
- 360MustangScope 3y agoPoint still stands, it is clearly not as much of a big deal as people make it out to be. Especially in respect to that coworker
- matheusmoreira 3y ago
- deleted 3y ago[deleted]
- stevedewald 3y agoThis article is incorrect. The rule implemented a safe harbor for large card issuing companies that have to comply with rules regarding late fees. The safe harbor means issuers can charge $8 late fees and be sure they are in compliance. Card issuers can still charge more than $8 for late fees. They just need to comply with existing regulation, specifically that whatever late fees they charge are “proportional” to their costs. Don’t expect an $8 cap on late fees as a result of this.
- hackburg 3y ago[dead]