“Important Account Price Change Notification” was the title of the letter that American Express sent to certain cardholders last week. “Change”, of course, is usually a euphemism for “increase”. And this letter was no exception.
They were announcing three rate increases: on finance charges for cash advances, on finance charges that have a penalty rate on them because of a late payment, and on late fees. The latter, incidentally, is going up to $39 on previous balances of $250 or more.
The last item was a shocker, however.
*MOUSE PRINT:
Effective with billing periods that begin on or after October 1, 2009, the Over-limit Fee subsection of the Other Fees section of your Agreement is deleted.
Wow… no more over the limit fees on certain AMEX cards. Hey Citi, Chase, and Bank of America… did you hear that?
They didn’t eliminate the over-limit fees out of generosity. The eliminated them as part of the new rules in the Credit Card Accountability Responsibility and Disclosure Act of 2009 which places substantial restrictions on when an over-limit fee can apply.
You can expect to receive similar messages from most major card issuers. As a result of the restrictions placed in the new law about increases in rates, I would suspect that most issuers will simply raise rates and some other fees (possibly the reintroduction of annual fees on many accounts)across the board for all cardholders instead of just the ones they determined to be higher risks.
There’s never been a better time to cut up all your credit cards and to start living on what you make.
I got one of those. Fortunately I pay AMEX off each month.
Shawn, what exactly makes you think people who use credit cards don’t live on what they make?
@Shawn, while it is tempting to never use credit it hurts your credit score. Since that score is used for so many things (many not remotely related to finance or credit) it really isn’t something you want to have messed up.
Ideally you want to be responsible and charge just a little each month and always pay off the card. Our rule of thumb is that we have to already have the cash budgeted or on hand before we charge something.
I agree with Shawn. I cut up my credit cards and have only two left to pay off. I am on the Dave Ramsey get out of debt plan. I don’t plan on borrowing any money for anything except a mortgage. When I get a mortgage I will get on that is manually underwritten, which means the mortgage company will not look to the credit score but will verify that I have a job and pay my bills on time. I don’t need a I love debt score. It is true that I may not be able to rent certain apartments or get the best rate at some insurance companies but I will take that risk. Their are plenty of companies and rental companies that cater to people who pay with cash and pay on time. The credit card industry as a whole has lost me as a customer because of all the games they play. I am tired of being a slave to the lender. Dave Ramsey has a lot of good information on his website.
@Kyralessa – because there is no reason to borrow the banks money if you have your own.
@Cory – I don’t used credit and I do just fine. I have no FICO score and I do quite well. I have a big house and several rental properties – all paid for. By the way, you absolutey can get a mortgage loan with no FICO score.
@Shawna – Dave Ramsey is RIGHT ON! I’ve been using his system for a while now. Keep your debt snowball rolling!!
@shawn if the bank wants to give me their money for 30 days, why shouldn’t I take it? I like to keep my money in my pocket as long as possible. I have no problem working with the banks money, even if it is only for a short time.
Under the new law, credit-card issuers can’t charge over-limit fees unless a consumer agrees in advance to the fee. Somebody was thinking with this rule because it specifically states that banks can’t assume consumers agree to the fees — a borrower has to actually opt-in.
However, if a borrower doesn’t opt in, charges over the limit would be declined.
I suspect Amex ended their over-limit fees because 1) Their software system can’t currently support an opt-in program, 2) The administration cost would outweigh the benefit (sending out notices, updating accounts with consumer selection, modifying account settings as people change their minds, managing complaints for fees charged in error, etc.). 3) They suspect most people would opt out so by eliminating the fees they can still accept the over-limit charges, earning revenue from interest for these charges.
The rule about over-limit fees doesn’t go into effect until Feb 22, 2010, but a couple changes kick in tomorrow (Aug 20, 2009): 1) At least a 45-day notice for significant changes in terms, and 2) At least a 21-day grace period for payments. Two of my issuers have extended their grace period from 20 to 25 days (Chase and Amex).
Ironically, this last rule will increase revenue for banks — cardholders carrying a balance will pay additional days at the higher balance amount.
For people who can’t handle using credit, then credit cards are not the right tool, cash is. Before credit cards became the way to go, clueless people still managed to spend more than they had. Credit cards are not in themselves “evil”, the companies spell out the terms – pay by this date or get a fee – but are very good at dinging people who don’t pay attention to the rules, or think it doesn’t apply to them. I have never paid any fee or charge on any credit card ever. And have had one since 1985. I play their game, follow their rules and every month get a 30 day loan without interest or/or fees. I used to be considered a “deadbeat” by the banks, as they didn’t make as much $$ off me, but now I am a golden egg – still pay my balance in full, but they aren’t losing money on me now. Have not had one credit line cut, one card canceled, interest rate increased – well that may have happened, but quite frankly it could be 1000% and it would not concern me.
Business regulation is going to affect some part of the business there gonna pass off the expense in one way or another it’s just the fact of life when your a huge credit card company sad but true.