Since Bankrate.com's April 2010 Credit Card Fees Study, new restrictions on penalty fees have taken effect under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 that dramatically changed how much issuers can charge for missed payments, over-the-limit transactions and inactivity, and barred credit card issuers from charging a fee for nonuse of a card.
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To gauge the impact of the law on the credit card fees charged by issuers, Bankrate surveyed 66 credit cards from the 50 largest issuers. It looked at the same 73 nonpremium cards included in the 2010 study.
For the first time, Bankrate also collected data on the fees, deposit requirements and other conditions on secured credit cards from the 50 largest issuers. Few of the issuers offered a secured card, which requires a collateral deposit from the cardholder in case of default. The survey turned up just 15 secured cards. The study was conducted from April 14 through May 2, 2011, using information from credit card offers and customer service representatives.
Penalty fees made predictable
The Credit CARD Act set safe harbor caps for penalty fees charged for missing a payment or going over the credit limit. Issuers may charge up to a safe harbor cap without facing questions from regulators.
One violation could cost up to $25, and another offense occurring within six billing cycles could cost up to $35 unless the issuer could prove that a higher fee was justified. In addition, issuers couldn't charge more than the dollar amount associated with the offending transaction. Failing to make a minimum payment of $20 means the fee could go no higher than $20.
Not surprisingly, almost all of the credit cards reflected these safe harbor caps. Many cards used language indicating that the late fee was "up to $25" or "up to $35." Just one card had a late fee of $39. It's a major drop from our 2010 survey, when 28 of 73 credit cards charged either a flat late fee of $39 or a range of up to $39 depending on the balance.
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As for overlimit fees, the CARD Act bars issuers from imposing a fee for an over-the-limit transaction if the cardholder hasn't agreed to allow transactions that would take their balance over the credit limit. Without this opt-in, issuers can't charge an overlimit fee, though they can reject such transactions.
Bankrate's survey found that 79% of cards have no overlimit fee, an increase from the 2010 study, when 60% had no such penalty fee. Of those cards that did charge a fee, fees ranged from $15 to $39. This year the fee topped off at the safe harbor cap of $35.
Annual fees remain scarce
The pre-CARD Act prediction that annual fees would become more widespread as a reaction to restrictions on rate hikes and fees has failed to materialize. A whopping 95%, or 63 of 66 cards surveyed, have no annual fee. That's up slightly from 90%, or 66 of 73 cards, surveyed last year.
Before a balance transfer, shop around
Before signing up for a new balance transfer credit card, it pays to compare the cost of the transfer. The credit card law didn't restrict balance transfer fees and they vary widely in the marketplace.
Typically, balance transfer fees are expressed as a percentage of the amount transferred. In our survey, the most prevalent fee was 3%, though minimums and maximums varied. Five cards charged a 4% fee with no maximum. On the lower end, 58% of the cards -- most of them issued by credit unions -- charged nothing for a balance transfer, which is consistent with the 55% of cards from our 2010 survey that didn't charge the fee.
Foreign transactions fees are common
If you're heading overseas or doing some shopping with a foreign retailer, you might want to compare the fees on your credit cards for currency conversion.
In Bankrate's survey, a foreign transaction fee of 1% or 3% were the most common amounts charged, with 30% charging 1% and another 30% charging 3%. Only eight cards didn't charge a fee for foreign purchases.
A current look at secured cards
If you can't qualify for an unsecured card, you might consider a secured credit card. The good news, as the survey revealed, is that there are secured cards out there that charge a reasonable annual fee and no other upfront fees.
In fact, the Credit CARD Act limited excessive upfront fees by requiring that nonpenalty fees assessed during the first year after issuance not exceed 25% of the initial credit limit. The Federal Reserve Board later clarified that this restriction also applies to fees charged before the account is opened, such as application or processing fees. Secured cards were among those cards affected, since many of them charge annual fees and some a multitude of other fees.
What can you expect from secured cards in the current environment? According to Bankrate's survey:
There is no "typical" annual fee. While eight of 15 secured cards charged a yearly fee, the fee ranged from $18 to $40. You'll need to shop around for the lowest fee.
None of the cards charged an application fee or any other upfront fees.
All 15 report card activity to the three major credit reporting agencies. The reason for using a secured card is that the issuer reports your monthly payment history to Equifax, Experian and TransUnion, the three major consumer reporting agencies. Responsible use of a secured card can build a good credit score.
Nearly half require a $500 minimum deposit. The required minimum deposit ranged from $49 to $500, but $500 was the most common. The deposit is money you won't see while the account remains open.
You usually get what you give. Out of 15 cards, 11 make the credit limit equal to the deposit. For example, a $300 deposit would get you a $300 credit limit.
Some cards pay interest. Though the yields are paltry, nine of the cards in the survey pay interest on the deposit. The annual percentage yields ranged from 0.05% to 1%, with 0.10% being the most common.