Potential Still Exists for Credit Card Abuse

Muncie, INHappy New Year. Beyond the headache from too much New Years' revelry is the financial headache of Christmas bills coming in. But lest you think otherwise, credit card abuse takes many forms and is not limited to the consumer simply using the plastic way too many times. There are also credit card fees that comprise a never-ending parade of charges.

The good news—recent updates to federal regulations mean the consumer will no longer be taken completely to the cleaners. However, there are fees and charges that credit card consumers need to watch out for, along with traditional credit card over-limit fees and credit card late fees.

For one thing, the jury is out as to whether or not credit card interest rates will increase, fall or stay put. What is known is that balance transfer fees—the fees charged by credit card companies to persuade the consumer to transfer a balance from a high-interest card to a lower one—are increasing.

The Chicago Tribune on December 23 noted that balance transfer fees have been steadily increasing, according to Bill Hardekopf of LowCards.com. "Several years ago there weren't any balance transfer fees, then they went to $50 or $75, then they increased to three percent" of the amount transferred, Hardekopf said.

Some cards offer no balance transfer fees, together with a low, introductory interest rate, as incentive to persuade a consumer to adopt a new card—a potentially attractive option for consumers who have racked up large balances on existing cards during the Christmas spending spree.

However, when there are balance transfer fees charged, they are usually charged upfront. Bankrate.com's senior financial analyst Greg McBride offered that issuers would continue to adopt four and even five percent transaction fees for cash advances and balance transfers. It may not be an interest rate on balances per se, but an increase in transfer fees amount to credit card rate hikes just the same.

Another attraction to signing up for a new card is an offer for cash back based on a certain plateau of purchasing. Travel offers have become more enticing too, but there's a catch, according to Hardekopf. He warned that some cardholders would be charged annual fees if the cards are not used enough.

"A lot of the reward cards don't have those annual fees right now," he said.

But they could down the road.

And lest you think that credit card companies are backing off from solicitations in the wake of the financial meltdown of the last two years and the implementation of new federal rules, think again. The Tribune reports that solicitations are up a whopping 62 percent in 2010 over a year earlier. According to Synovate Mail Monitor, that translates to 2.25 billion credit card solicitations.

Jackie Grutsch McKinney, associate professor in English at Ball State University in Muncie, Indiana, told the Tribune that her son received his first credit card offer in the mail two weeks before Christmas. Her son is only five years old. It seems that wariness against potential credit card abuse can never start too early…