Post-Reform Credit Card Scene: New Dirty Tricks Replacing the Old Ones

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The monumental credit card reforms that began taking effect last summer had some unintended consequences—namely soaring interest rates, higher fees, and less credit available. But mostly, the laws succeeded in stopping the banks and credit card companies from using the same old dirty tricks to get extra money out of customers—by, say, mailing out bills with quick pay-by dates that increase the chances of late fees. The problem is that the banks and credit card issuers are really good at what they do—namely, getting money out of customers—and they’ve already creatively come up with a bunch of new dirty tricks to replace the banned old ones.

The banks and credit card companies are able to move way faster than federal regulators, and if they’re not allowed to make money doing X, they’ll quickly adjust and start charging for Y. Like the JP Morgan Chase CEO said recently, the strategy is pretty simple:

“If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger … Over time, it will all be priced into the business.”

As a consumer, you must be aware of the shifting landscape of new fees and policies. You should assume that changes announced by your credit card issuer are not being made in your favor, and you should always be willing to drop one card and begin doing business with an alternate with more reasonable policies. It is all a game of Whack-A-Mole, as I’ve said before, and, while it may not be as fun as a visit to the arcade, if you don’t play, you’ll be the one clubbed on the head—in the form of surprise charges and fees you could have sworn were outlawed and you needn’t worry about anymore. (More on See a gallery on how to restart the world economy)

The WSJ has a big roundup of “The New Credit Card Tricks,” and some of the tricks are very simple and straightforward increases in rates and fees. Just since last summer, foreign-transaction fees, balance transfers, cash advance, and annual fees have risen 50%, 33%, 33%, and 18% respectively.

These increased charges, while annoying, are easily to identify and quantify. It’s the sneaky fees that are aggravating in a different, more insidious way. A good example is the inactivity fee. Last summer, I did a post about how some card issuers, facing the new regulations, were adding “inactivity fees”—which basically means you’d be charged for NOT buying stuff, as crazy as that seems. The inactivity fee has since been banned, but that doesn’t mean this line of charges has disappeared entirely. (More on See photos of a stagnant Japanese economy).

While the card companies can’t charge you for not buying stuff at all, they can charge you for not buying enough. The WSJ explains that some cards require customers to meet certain spending thresholds. If they don’t spend enough, they’ll be hit with an annual fee. The WSJ explains:

Citigroup, for example, has started charging some of its customers an annual fee, which can be waived if a customer’s card activity exceeds $2,400 a year.

Tristan Denyer of San Francisco says he was surprised when he got a notice that Citigroup was instituting a $60 annual fee on his card. Mr. Denyer, 37, a senior Web designer, says he rarely carried a balance on his card, and refused to rack up the $2,400 in charges necessary to erase the fee. “I figured this was just a tactic to get me to spend more and give them more money,” Mr. Denyer says. He says he decided to close his account.

Depending on the cards in your wallet, you might want to do the same.

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