New Federal Rule Caps Credit Card Late Fees at $8

https://www.nytimes.com/2024/03/05/business/credit-card-late-fees.html

by jbegley • 2 years ago

223 267 2 years ago

nytimes.com

dkjaudyeqooe• 2 years ago

To give non US people some idea they can run to around $40 right now.

cosmotic• 2 years ago

I'm in the US and I was looking for that information too, thanks

AH4oFVbPT4f82• 2 years ago

I'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.

muttled2• 2 years ago

Is that monthly?!

aidenn0• 2 years ago

Somewhat 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.

yieldcrv3• 2 years ago

Am 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• 2 years ago

You're using a lot of words to say: "They avoid Citi because they gave them bad service".

oarla• 2 years ago

No, 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.

abawany• 2 years ago

Citi 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.

gnicholas• 2 years ago

Citi is usurious

I have had both good and bad experiences with them. I recall they charged a ridiculous fee for a cashier's check when I was in law school and needed to move my student loan money. I seriously considered withdrawing it all (tens of thousands) in cash and walking it down the street to WaMu.

Another time, they completely refunded a several-hundred dollar charge for a hotel that misrepresented itself as a boutique luxury spot, yet lacked many basics. The hotel fought the chargeback and was going to make it a miserable process, so Citi just refunded the whole thing (we had only asked for a partial refund).

What I've found with banks and others is that lower-level people will say that it's impossible to help you, and that if you speak to a supervisor they will say the same thing. But most of the time, supervisors do have more power, and are able to make things happen. There's no particular rhyme or reason for why extraordinary relief is sometimes granted though — it seems completely random!

selimthegrim3• 2 years ago

Can confirm. Have encountered this.

projektfu• 2 years ago

My experience has been that banks are very forgiving when you're otherwise generating income for them, but strict when fees are their primary source of revenue to them. So, you have a large installment loan, they give you a better checking relationship. You do a large volume of credit transactions, they waive fees pretty easily.

But if you have $30 in checking and a card with a $500 limit, it's fees on top of fees. These introductory accounts used to be ways if getting students in the system so that they could maintain the relationship, but now all thinking is short-term and they just want the money up front.

jimt1234• 2 years ago

I paid my college tuition with my Discover card (back in the mid-90s). I was waiting in line at the student loan office, with my stack of paperwork, when I glanced over and saw a Discover kiosk in the student center. I filled out an application, and in about 10 minutes I had covered my tuition for the semester. I just kept charging my tuition to my Discover card. When I hit the limit, I called them and they bumped it. I probably paid more, but at least I didn't have to deal with the god damn student loan process. Ugh.

wolverine8762• 2 years ago

Most credit card interest rates are far, far higher than student loans?

GuardianCaveman• 2 years ago

Citi consistently was the card who would freeze and not work when I was overseas despite me telling them I was traveling leading to many embarrassing moments. They always say, oh we're just trying to protect your account from fraud. I'm like, you already guarantee i'm not responsible for fraud so you're just making my life inconvenient to protect CITI from fraud.

tsycho• 2 years ago

This still happens consistently, and I don't even have to leave the country, I just have to buy flights to a foreign country (eg: for vacation) or buy something from a foreign website (eg: buying a gift for my family).

The only reason I use them is for their 2% cash back on everything, but I have stopped using them for any non-domestic purchases.

hnick2• 2 years ago

I had the opposite problem - we received a card that we didn't activate (basically, lapsed account, being young and too lazy to close it).

They let someone in the USA (we are in Australia) pay a Netflix subscription with it. This was new, so it wasn't one of those inherited authorisations that sometimes exist when a card switches over. So not only did someone get the card number from a card that was never used, they let the transaction through when it was never activated.

It took numerous phone calls to sort out. Every time we did, there was a rounding error due to interest, foreign currency fees, etc, which meant we still owed money despite the only transactions being unauthorised. The ladies in the Philippines were nice, but it was ultimately an annoying ordeal.

lsllc• 2 years ago

Yes the classic one is that you make a transfer on the checking acct instead of savings and end up using a bit of you line of credit. So you get the payoff amount and pay it, but it doesn't include the interest for today. So tomorrow, you still owe a few cents and if you don't pay it off (because you thought you did pay it off already and they don't notify you until it's actually late), you end up with another $30 late fee for a fraction of a $ in interest. Looking at you Santander.

Back in the day the banks used to order your withdrawals largest first when posting them overnight to maximize the number of times you'd get overdrawn (and get an overdrawn fee). People would get hit by multiple overdrawn fees in one day. I think they outlawed that one a few years ago.

camiat• 2 years ago

With the announcement of Capitol One planning to buy Discover, what are the plans now?

As far as I know, Discover had the best customer support experience I had with credit cards. I'm not sure if there are other cards with a similar level of support.

trey-jones• 2 years ago

I'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).

ars3• 2 years ago

There 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.

aaomidi3• 2 years ago

Why are we punishing people for being poor again? Stick with the interest fee.

Late fees make absolutely no sense

matchbok2• 2 years ago

Then don't use a credit card. Simple.

bigstrat2003• 2 years ago

I'm neutral on this subject, but I don't think "punishing people for being poor" is an accurate framing at all. It's more like "punishing people for making bad financial decisions".

ars3• 2 years ago

Interest 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.

odyssey73• 2 years ago

Imagine 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.

ars3• 2 years ago

That'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.

endisneigh12• 2 years ago

Why even have late fees at all? You're already paying interest.

_heimdall30• 2 years ago

You 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.

endisneigh12• 2 years ago

If they don't pay the bill why would they pay the late fee?

wolpoli3• 2 years ago

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.

You just described minimum payment, which is separate from late fee.

throwitaway222• 2 years ago

If you never pay the bill they take you to court. There still doesn't need to be a late fee.

tintor2• 2 years ago

bank profit

_heimdall30• 2 years ago

I'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• 2 years ago

The 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.

_heimdall30• 2 years 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.

aaomidi3• 2 years ago

Banks are free to not participate in making credit cards if it’s too expensive for them.

maxerickson4• 2 years ago

Do you feel the same way about the limited liability offered to investors in corporations? After all, if they don't want financial risk, they should just not invest in anonymous businesses that they don't have any control over.

Which obviously I'm being oblique, but of course the government should do things that ensure corporations benefit society, because that's why government has regulations to encourage their formation, for the benefits they can bring.

_heimdall30• 2 years ago

Do you feel the same way about the limited liability offered to investors in corporations?

I think you meant this a bit facetious, but yes I do feel similarly there. I don't expect investors to he held liable for internal decisions made by companies, but absolutely if an investor doesn't want the financial risk they shouldn't invest. I'd argue that we only have those liability protections to keep people investing, without that our monetary system crumbles.

of course the government should do things that ensure corporations benefit society

That only seems necessary if society has become so large and outsourced that we can reasonably make impactful decisions as consumers. Consumers should be close enough to the companies that they invest in or work with to know generally what that company does. You obviously don't need to know all the details, but at least enough to know that you generally think they're on the up and up, and if not you just take your business elsewhere.

The necessity of government involvement, in my opinion, means that a society and the lives of it's citizens has gotten much to complex, and is ultimately then much too fragile.

nonethewiser4• 2 years ago

Then why allow interest and late fees at all then?

tbrownaw3• 2 years ago

If consumers aren't willing to risk paying late fees, just don't use credit cards.

Half of all people are worse than average at that sort of planning ahead.

_heimdall30• 2 years ago

I don't think that's something the government can regulate away.

bombcar10• 2 years ago

People are really, really, bad (in general) at correctly managing these things, whereas companies are really good at it.

The sad truth is that for the financial health of much of the population, credit cards should be forbidden entirely, but that would cause too much howling because you can't just "forbid them for poor people" even though those are who are taken advantage of the most.

_heimdall30• 2 years ago

That's a much bigger problem than CC late fees.

We can't legislate this away. If that's the problem we're chasing, a better approach might be investing in better financial education or decreasing the wealth gap.

Spivak2• 2 years ago

A "credit card" where it's not really a loan would do wonders. Standard limit based on your income and credit rating but you have to pay it off in full at the end of the month like any other bill else it gets shut off like a utility. You can still get the points, perks of spending other people's money/consumer protection, and 30 day float to smooth over paychecks but no debt.

makeitdouble• 2 years ago

So, you don't trust your government to do the right thing, and also fully expect banks to screw you. When you talk about living without a credit card, do you mean cash at physical shops ?

Feels like you're advocating for a very peculiar way of life.

_heimdall30• 2 years ago

Feels like you're advocating for a very peculiar way of life.

That's all based on perspective, but yeah I would expect plenty of people to find my life peculiar.

For me it isn't about trusting my government, though the US government was originally based on distrust. The government has to earn and retain my trust, it isn't a given or free.

There are alternatives to credit cards, including debit cards. Cash is also still viable in the US, though I know its becoming much less common in other parts of the world.

I personal don't think spending cash in physical shops I'd peculiar, but maybe I'm just that out of touch?

ambichook• 2 years ago

i avoid them like the plague because i hate owing money, but i'm not from the US and as far as i understand, having a credit card is really important for building a credit score there isn't it? would not holding a credit card not also make it harder to say, find places to rent?

umvi• 2 years ago

You have better fraud protection with a credit card and you can generally get better kickbacks (some fraction of merchant fees - Amazon Prime credit cards have 5% kickbacks meaning if you buy something for $100 with it, you get $5 back).

_heimdall30• 2 years ago

There are benefits for sure. Maintaining a good record on your credit card will help your credit score, though that only matters if you plan on regularly borrowing large sums of money.

I haven't rented in a while so I'm really not sure on that one. Most places I rented over the years assumed you paid by check every month, though its been about a decade now so that very well could have changed.

rahimnathwani3• 2 years ago

  If consumers aren't willing to risk paying late fees, just don't use credit cards.

Right, if you have an unexpected emergency (like repairing the car you depend on to get to work), just pay for it from your trust fund! /s

_heimdall30• 2 years ago

This is a deep rabbit hole you're digging towards.

I'd argue that if you can't afford to repair your car you can't afford the car. And if we've built a society where personal ownership of a car is a necessity we have failed on a fundamental level.

Having an open line of credit is helpful for sure, but you shouldn't depend on it. Having to dip into debt to cover an expense means you've fallen behind, and if you couldn't afford it before you are less likely to afford to dig out of the hole now. Not having a credit line means you may run out of money, but it also means you can't go into debt.

tananaev• 2 years ago

Totally agree. This is a problem that is easily solved by the free market. You get a high fee once, you will learn the lesson and either be more diligent or use a bank that has lower fees.

I think it's just a cheap shot by some politicians to get easy points. It always sounds good when they punish big greedy banks/corporations. But in reality those small regulations slowly add up each year and in the long run it makes it harder for smaller players to get into the space. And lack of competition makes it easier for bigger players to abuse their position. So the opposite of the original intent. And the cycle continues. More intervention needed etc.

plz-remove-card2• 2 years ago

the opposite of the original intent

Agreed, I see this occur over and over, what seems like reasonable or good intervention often backfires in the most unexpected ways.

makmanalp• 2 years ago

They are a convenience product at best and a predatory lending mechanism at worst just don't use credit cards Why do we need yet more government intervention to solve this?

I guess I'm a bit confused about your position here - you note that it's predatory, and then you continue on as if it's an easy choice: maybe we disagree on what predatory means?

I can't recall a single class in school or anywhere else that taught me about the dangers of credit cards and debt that grows cumulatively. Yet credit cards are aggressively marketed like candy through the mail and every time I shop at a big box store or even online. Not to mention other kinds of debt like student loans, car loans, mortgages, etc.

A lot of people don't even begin to understand the things they need to be aware of to make a truly informed decision to take on debt: compounding interest, amortization schedules, inflation, their budget and runway in case their income stops, etc. They do not do some quick back of the napkin math on how much extra they'll be paying during the lifetime of the loan, and whether that extra cost is worth it. And credit card companies are fully aware of this, and leverage it for maximum benefit of course. They jump at you at the situation where you're least likely to stop and think: you're spending a surprise 1000 bucks to replace your busted heater which is really gonna eat into your food and gas money - wouldn't it be great if we gave you 100 dollars off of that right now? Just sign up for a store card, it takes 2 minutes! Also, the minimum payment will be so low! That'd be the "predatory" part.

Just "choose to live without them" is not effective if you're both underinformed and poor, AND companies are incentivized to push debt on you. Heck - when I was a (supposedly educated) college student, I was hit by an overdraft fee: I bought some lunch, and later a snack from the vending machine. And I paid 20 + 20 dollars in fees for the privilege of 2 transactions totaling about 7 dollars. It made no sense to me: how could you spend money that you didn't have in your account? It just wasn't a thing in my home country. Should I have known better and read 15 pages of small print? Yes. Did I? No. When I called, the bank said I should be happy they've opted me in to this "service". If I had known, I would have just not made those purchases. I also ran into trouble trying to opt out. Predatory.

How do you propose we bridge a massive gap in financial literacy when we as a society are struggling with basic literacy and financial stability? I don't mean like 20 years in the future ("better financial education" which is the same as "hopes and prayers"), I mean right now. So that leaves us with not much other than regulation.

What this rule cuts down on surprise fees, which isn't nearly a complete fix. But it's an okay incremental improvement: it's one less thing to watch out for. Either offer a simpler, easier to understand financial product, or don't. There's no god given right to a profitable business, especially when it's not based on a mutually beneficial transaction.

_heimdall30• 2 years ago

I really don't know how to phrase it empathetically, and I know its an unpopular opinion when spoken, but if someone chooses to take on debt they can't afford then they have to deal with the consequences. What absolutely should be done, though, is to make sure that companies are kept 100% on the hook for their actions. Governments shouldn't bail out banks when they get caught holding an bag full of nothing but bad debt. Student debt for example, shouldn't be treated ant differently from other debt in bankruptcy proceedings. Companies should be legally liable for advertising that misrepresents their products.

Ultimately companies advertising debt products or making it easy to sign up isn't forcing anyone's hand. We all make our own decisions, and if that includes signing contracts that we didn't read or understand then I'm not sure what else can be done.

With that said, financial literacy and our education system in general are absolutely terrible IMO. I could care less if someone learns integrals in school, or practices dissecting a baby pig in biology class, if they don't learn the basics of how the society we've built works. Kids should learn finances, contracts, and politics above all else. Learn how money works, learn how how our laws and political system works, then if you have time read Shakespeare or play the trumpet.

I know I sound arrogant or crass, but these skills are extremely important and seemingly entirely ignored in school. We force most kids to be in school for over a dozen years. It doesn't take nearly that long to learn the few topics I called out. There will be time for biology, the arts, mathematics, history, etc. I'm not saying throw those out, just reprioritize them with an eye towards the world people will actually be in after graduation.

standardUser2• 2 years ago

I'm always a bit annoyed by the need for new rules and legislation similar to this.

Before the Obama-era credit card law, if you missed a single payment at a bank your entire balance would revert to the "default" interest rate, which was close to 30%. Then, every other bank you had debt with could also change your interest rate to the crippling "default" rate.

I think that was a good change and I think this is a good change. Credit cards are a widely-used financial tool that can provide a lot of benefits. If someone is on a fixed income or working for low wages, I want them to have access to that tool too without unneeded risk. People go to the hospital, relatives die, a computer fucks up, and it's suddenly really easy to miss a single payment. And given the history of banks' nasty policies towards consumers, we have zero reason to assume they aren't gouging.

How does the government actually land on $8 as a universal, reasonable late fee?

If you read the article you will find a link explaining this to you.

wolpoli3• 2 years 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.

_heimdall30• 2 years ago

A more cynical view would be that the government is backed into an economic corner and need an ever growing level of consumer debt to prop up the markets and/or currency.

chiefalchemist8• 2 years ago

Why is that cynical? One of first things POTUS Bush #2 said in the wake of 9-11 was (effectively), "Keep shopping."

It's a fiat currency based system that persists simply on the belief that it's too big to stop (i.e., fail). Just keep your head stuff in the sand, keep pushing forward and pretend there's no cliff ahead.

Dylan168076• 2 years ago

Why do you think it needs to be "ever growing" to serve that purpose?

dheera2• 2 years ago

Can 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• 2 years ago

The world is a lot more complicated than you're making it out to be.

moate• 2 years ago

Weird that “the wealthy abuse the poor” is literally part of your complaint but you’re not focusing on them and instead the only group that could potentially rectify that without violent revolution.(please note: “could” is doing a lot of work in the previous sentence and I understand that many of those in government are there to ensure the right for the wealthy to continue this abuse).

Do you believe landlords would lower rents tomorrow if their tax was lower absent any other force incentivizing them to pass that profit back? I’m pretty sure there was a post on here a few days ago about how current rent pricing software used by many many people may be violating price fixing laws.

Do you think that without regulation banks would be better? That somehow the process of reigning in their avarice is causing it? When has that ever historically been true, as almost any era or un/deregulation coincides with massive wealth disparity.

BHSPitMonkey• 2 years ago

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.

Under the 2023 tax codes, a single filer in California would have to have an household income of $118,250 in order to see a 30% effective tax rate across federal and state taxes combined. I understand $118k might not go as far as it used to (depending on the specific location), but that's hardly the "poverty class". Under the same conditions, a $50,000 income would see an 18.84% effective rate.

Both calculations assume the standard deduction is used; common tax credits and deductions would bring the effective rate lower. These were calculated using: https://smartasset.com/taxes/california-tax-calculator

I don't disagree with the premise that taxes, both federally and at state levels, could be more progressive than they already are, ceteris paribus. Property and sales taxes are broken in this regard, and the obscenely wealthy have too many pathways to avoid contributing meaningfully to the nation's collective tax burden.

op00to3• 2 years ago

You can live in a cesspool if you want. The rest of us will be over here with public sewers taking our poop away.

callalex2• 2 years ago

Why don’t you choose to live somewhere like Somalia or Haiti?

briHass• 2 years ago

It'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• 2 years ago

The 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• 2 years ago

They are already charging as much as the market will bear

TuringNYC2• 2 years 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"

caturopath• 2 years ago

They aren't suggesting they'll charge appreciably more; they are suggesting they'll charge the same in different ways.

bmelton• 2 years ago

The market will only bear so little because there is competition creating a race to the bottom. If all of the credit card providers are to absorb the same hardship, then it is akin to moving the finish line, and the market will bear more because the market will have to.

CPLX• 2 years ago

Or maybe it’ll come out of the executive golf budget.

I’ve never understood why people always argue that we have to allow bullshit fees and overcharging “or else” when there’s clearly plenty of examples of existing waste and inefficiency in every business. Large monopolistic businesses especially so.

refurb3• 2 years ago

How are credit cards anywhere close to monopolistic?

TuringNYC2• 2 years ago

Ah, the "Regulatory Recovery Fee" tactic of telcos

adamsb6• 2 years ago

They have two levers, whether or not to extend credit at all and what interest rate to charge.

Ekaros• 2 years ago

Monthly charge? Less rewards?

grecy• 2 years ago

Why 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.

Tarball10• 2 years ago

You still have to make the minimum payment on time when carrying a balance.

tbrownaw3• 2 years ago

Late fees aren't for carrying a balance, they're for not making a payment (which is perfectly well allowed to be less than the outstanding balance) on time.

ValentineC• 2 years ago

https://archive.ph/07zHH

exabrial• 2 years ago

I 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• 2 years ago

the water selling company is dumping shit in our water!

i mean, i guess you could drink from the creek or the sewer.

babyshake• 2 years ago

More 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• 2 years 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• 2 years ago

I 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• 2 years ago

I’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• 2 years ago

There'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".

JumpCrisscross2• 2 years ago

autopay should generally be opt-out rather than opt-in

I’d much rather be late on a payment than unexpectedly drain my cash.

BugsJustFindMe• 2 years ago

It's not unexpected because you're checking your statement summaries when they arrive and being notified of transactions as they happen. Right?

Because not having those things set up by default is how people spiral in predatory fees.

nonethewiser4• 2 years ago

Then turn off autopay

Nifty39292• 2 years ago

Seems 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.

Sparkyte2• 2 years ago

Secured 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• 2 years ago

The 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?

caseysoftware• 2 years ago

Based 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-acc...

anonuser1234562• 2 years ago

Credit 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.

ThunderSizzle2• 2 years ago

There 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.

odyssey73• 2 years ago

It’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.

keiferski2• 2 years ago

It’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.”

standardUser2• 2 years ago

It 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

keiferski2• 2 years ago

From quickly researching this, it used to be much more restricted until the 70s and 80s, when a lot of deregulation took place.

exogen• 2 years ago

At 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• 2 years ago

that'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• 2 years ago

It 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• 2 years ago

I 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• 2 years ago

I have not heard of that since 2020.

Not sure it’s the norm

360MustangScope2• 2 years ago

Does 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.

matheusmoreira2• 2 years ago

It's like it's become the norm to default.

Even countries default. Such is the risk of giving money to someone else: they might not actually pay you back. Maybe these banks should think thrice before extending lines of credit to people.

But they want to efficiently allocate the funds, don't they? Let them reap the consequences of their own decisions.

stevedewald• 2 years ago

This 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.

New Federal Rule Caps Credit Card Late Fees at $8

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