Apart from the initial sting of a one-time late fee for missing a credit card payment, lenders also like to hit consumers with hefty penalty interest rates.
But while the average penalty rate has risen in the last year, a new CreditCards.com survey reveals fewer credit card companies than ever have been actually enforcing them against customers.
The survey looked at 100 of the most widely-held credit cards and found the rate of lenders charging penalty interest fees dropped more than 20% between 2010 (91%) and 2011 (69%). On the other hand, the average interest rate applied to penalty charges jumped from 27.9% to 28.6%.
The company partially chalked the decline up to the CARD Act, which was created in 2009 to help consumers dodge penalty fees and limited when they could be applied. (Click here to see why you should think about switching to a credit union.)
Linda Sherry, director of national priorities at Consumer Action, has an optimistic outlook on the survey’s findings.
“Penalty interest rates have always been objectionably high, and they were applied [too liberally],” she told the site. “Overall, though, consumers are in a better position today.”
HSBC used to hold the throne for the lender with highest penalty interest rate (32%) but since it dropped its penalty rates altogether this year, Barclays took the top spot with rates of 30%.
30 cards joined HSBC in kicking their penalty interest rates, including Wells Fargo and U.S. Bank.
Because interest rate fees are often tied to overdraft fees, you can avoid them by opting out of your bank’s overdraft protection service.
That means your card will be declined instantly when there are insufficient funds, rather than your bank covering the purchase and then hitting you with a fee that leads to a fee that leads to … you get the picture.
And just because interest rate fees are on the decline doesn’t mean banks aren’t revving up other hidden fees to make up for lost revenue.
As Nerdwallet.com predicts, you should also get ready for transaction limits on debit cards, higher minimum balances, and replacement fees for lost cards.
Fees are just the beginning. Click here to see the 10 biggest banking trends you can expect in 2012 >