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Published on 08/11/1997 All articles from this issue

Check the small print on your credit card statement

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By Clyde Noel / Town Crier Staff Writer

Whether you like it or not, within the next two months the envelope containing the monthly statement for those credit cards in your wallet will include a densely printed leaflet announcing a change in the terms.

The banks that issue credit cards are tightening the reins under which consumers have frolicked to retail outlets in the past two years. Losses on bad credit card debt have soared to 7 percent of total balances, a higher level than in the 1990-91 recession.

San Francisco-based Consumer Action's latest annual credit card survey says banks are putting the squeeze on their card holders by increasing the traditional fees and creating all sorts of new charges to cover their losses.

Two years ago, 2.7 billion cards were mailed in the United States. Card issuers were pushing to increase market share and profitability by reaching into marginal credit risks. In 1997, an estimated 2 million credit cards will be mailed and the delinquency rate continues.

In May and June, Consumer Action surveyed 100 standard credit cards from 68 banks and found interest rates as high as 21.4 percent. Fifty-seven of the cards did not have an annual fee and most banks used a variable interest rate tied to the prime lending rate.

Consumer Action reports the average late fees on credit card payments have soared 28 percent in two years. Average fees for customers whose monthly balances exceed their credit limit jumped 25 percent.

"Consumers better read those card agreements carefully from now on," said Ken McEldowney, executive director of Consumer Action. "Banks are scrambling to squeeze money out of their cardholders by increasing the traditional fees."

Linda Sherry, editorial director of Consumer Action, reported many banks now assess late fees earlier than they did before.

"Even people who make timely payments could be hit with a late fee if their payment was delayed in the mail," Sherry said.

Several banks said they will assess an annual fee on "inactive accounts." Sanwa Bank of California will waive its $15 fee if you make at least $500 in purchases during the year, while Union Bank of California requires at least $3,000 in purchases to avoid their annual fees of $18 and $24. Cards issued by General Electric last year charged a $25 fee on accounts that always paid bills on time since the company made nothing on interest payments.