New reforms on Credit Cards go into effect today – it’s a good idea to check on changes to your cards:
That helps explain why the industry reacted so aggressively to the legislation. Among the moves it made:
— Resurrected annual fees.
Annual fees, common until about 10 years ago, have made a comeback. During the final three months of last year, 43 percent of new offers for credit cards contained annual fees, versus 25 percent in the same period a year earlier, according to Mintel International, which tracks marketing data. Several banks also added these fees to existing accounts. One example: Many Citigroup customers will start paying a $60 annual fee on April 1.
— Created new fees and raised old ones.
These include a $1 processing fee for paper statements for cards issued by stores such as Victoria’s Secret and Ann Taylor. Another example is a $19 inactivity fee Fifth Third Bank now charges customers who haven’t used their card for six months.
Other banks increased existing fees. JPMorgan Chase, for instance raised the cost of balance transfers from one card to another to 5 percent of the transfer from 3 percent.
— Raised interest rates.
The average rate offered for a new card climbed to 13.6 percent last week, from 10.7 percent during the same week a year ago — meaning cardholders had to pay almost 30 percent more in interest, according to Bankrate.com.
For millions of other accounts, variable interest rates that can rise with the market replaced fixed rates. The Fed is expected to start raising its benchmark interest rates later this year, which would likely trigger an increase on those cards.
Besides making credit more expensive, banks also made it harder to get and keep credit cards. One big reason: Since the financial meltdown, many credit card issuers have been trying to reduce risk.