President Barack Obama signed a piece of critical consumer protection legislation last month: the Credit Card Accountability, Responsibility and Disclosure Act. The law reigns in credit card companies’ billing practices and limits the fees that banks can charge consumers.
But where there is a will for fees, there is a way. Don’t think for a second that this legislation will usher in a fair credit-card playing field where card holders can blithely borrow money without the threat of fees. Credit-card companies, analysts say, will substitute one fee for another.
For instance, the newly minted card law—which goes into effect before year’s end—forces card companies to ask customers whether they would like to go over their credit limit and get charged a fee, or whether they would rather be blocked from swiping their plastic once they have exhausted their limit. In the past, credit-card companies would allow a cardholder to exceed their credit limit and then promptly ping them with an over-the-limit fee. So over-the-limit fees may be on their way to extinction, but new fees will rise to replace them.
U.S. shoppers who buy goods from foreign-based companies will now have to pay a 2% transaction fee every time they deal with a company off American shores. It doesn’t matter if customers never leave the safety of their living rooms. Once a card holder purchases anything from a foreign company, many card companies will start levying a fee.
Over the past decade, card companies have been penalizing customers who use their cards while traveling. The banks argue that they bear the cost of currency conversion and so need to offset that cost with fees. But before now customers didn’t have to deal with fees unless they left the country. Those days are over.
I actually got a letter from Bank of America in April which expounded on the new fee. The letter explained that Bank of America would be “expanding the definition of foreign transactions in U.S. dollars if they are made or processed outside of the United States.” Bank of America isn’t alone. Other banks have followed suit.
The bottom line: the new credit-card landscape is littered with land mines, hidden fees, and charges, so watch out.