Finance Quick Answers
I have noticed that more credit cards now have various fees and penalties. Why?
Credit card companies are targeting consumers with new fees, higher rates and swifter penalties. They are taking special aim at "freeloaders" - an industry term for those who don’t pay interest and always pay their account balance off on time.
Why crack down on the most credit worthy consumers?
Credit issuers’ profits have declined and they have no
one else to go after. Outstanding consumer debt tops
$450 billion, an all time high. More than one million
Americans filed for bankruptcy last year. Card issuers
are being forced to write off these bad accounts
entirely, a huge drain on industry profits.
Card users who seldom pay fees or interest aren’t
lucrative for the issuers. The industry, hungry for new
sources of profit growth, seems determined to change
Source: Your money. (1997, March). Consumer Reports, 68.
Sandra McKinnon, Consumer & Family Economics Specialist, University of Missouri Extension
Cynthia E. Crawford, Ph.D., Consumer & Family Economics Specialist, University of Missouri Extension
Last update: Sunday, July 27, 2008