What credit card companies have in store for you

December 29, 2006 at 4:20 pm 2 comments

MoneyTalk is no fan of credit cards and here are five reasons that reinforce our position:

  • $300 balance transfer fee
    Low-rate balance transfers are common and can save you big bucks. Low fee balance transfers will be harder to come by in 2007. The limit was capped at $50 to $75, but that cap will no longer exist with companies such as Citibank and Bank of America. Balance transfer fees will now be as high as $300. Read the fine print: If there is no reference to a maximum charge in your contract, don’t apply.
  • Rewards pulling a Whodini
    Oh rewards, how we love thee. Well, not for long. Credit card issuers are slowly scaling those offers back. American Express, for example, eliminated double points for everyday expenses and Citibank scaled back its’ most popular cards from 5% to 2% cash back.
  • Wave goodbye to your hard earned cash
    It’s cool and easy to use the new cards with embedded chips that allow you buy everyday items with a wave of your card. It definitely saves time, but does it save you money? No. According to MasterCard, consumers spend up to 36% more by waving their cards.
  • Giving kids plastic teaches responsibility
    MoneyTalk is supportive of parents teaching kids how to handle money and to be fair, some of these cards aren’t credit cards but merely prepaid cards. But let’s face it, credit cards, even pre-paid cards, don’t teach good money management. They teach kids how to spend money they didn’t earn. Parenting alarms should go off the moment card issuers targeted your kids. It’s not out of the goodness of their hearts and desire to help you teach them about money. It’s about getting the kids to spend as much as they can, at the parents expense.
    If you want to teach your kids how to handle money, teach them to work for it, how to save it, how to give it, and finally, how to spend it. Sadly, most parents can’t do that either.
  • Creative fee hikes
    It’s getting a bit more difficult for credit card companies to hike fees without government scrutiny. That leaves card issuers with trying to find creative ways to separate consumers from their money. For example, credit card companies are increasing lower-tier fees without changing the top tier. Meaning they can raise the $15 late fee to $29, while leaving the $39 high fee. There’s less chance that people will complain or that it will be noticed by government agencies. Credit card companies used to make their big bucks from interest payments on remaining balances alone. Now, they are increasing revenue sources by other means, more obviously, with fees.

Entry filed under: Credit Cards.

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2 Comments Add your own

  • 1. Chris  |  January 6, 2007 at 2:36 pm

    Annual fee is also one of the main income sources for credit card companies

  • 2. Randy  |  July 16, 2008 at 7:22 am

    If they’d stop mailing out millions upon millions of new applications, they wouldn’t need to increase fees. Then again, they don’t need to increase anything. They do it, because they can. We can try and regulate them. Then again, if we refuse to use their “service”, we’ve already regulated them.
    Credit card free here for 4 years now, and loving every minute of it.


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