Shopping around for a deal on a credit card seems like one of those things that’s pretty straight forward. Low, eye-catching rates are …
Shopping around for a deal on a credit card seems like one of those things that’s pretty straight forward. Low, eye-catching rates are plastered all over websites for those doing research online and paper envelopes with special credit card offers pop up in the mail. But are credit card issuers, really, all that competitive? The Consumer Financial Protection Bureau is taking a new, deeper dive into hidden fees, exploitative income streams and anticompetitive financial practices that can hurt consumers. We all know how hidden fees drive up our costs when buying concert tickets online. But some argue that the same can be said about fees relating to financial services and products. “These junk fees make it harder for us to choose the best product or service since the true cost is hidden,” Rohit Chopra, the director of the Consumer Financial Protection Bureau, said in a call with the news media Wednesday. Many times, Chopra said, banks and others obscure the actual cost that consumers pay when selecting a specific mortgage, bank account or credit card by highlighting an attractive offer but then charging inflated, back-end fees. Overdraft fees, late fees, check image fees, stop payment fees, closing costs and a wide variety of other fees will be under scrutiny. “By promoting competition and ridding the market of illegal practices, we hope to save Americans billions,” Chopra said in a statement. The argument being made by Chopra is that a new “fee economy” is distorting free markets and making it harder to comparison shop if you don’t know how much money will really come out of your pocket. Chopra said the agency is in the process of ending the banking industry’s reliance on what he called “exploitative” sources of income. After the financial crisis in 2008-09, we saw more push by Washington to improve disclosures. Late fees are clearly spelled out online in terms and conditions. Take a look at your credit card bills and you can spot the late fee there, too. But if everyone is charging the same fee, well, how much competition is there really? Or if the fee represents far more than the actual extra cost of a service, how fair is that? Consider shopping for a 0% introductory rate credit card. Even if you have a good credit score and qualify for the card, you’re still facing steep fees to transfer your debt from a high rate credit card onto a card that offers a temporary 0% rate for say nine months or longer. Balance transfer fees can be found fairly easily if you carefully read the terms and conditions of an offer. They’re not necessarily hidden but many consumers might not easily spot them if they don’t look or understand the real cost. Nearly every company will charge between 3% and 5% of the balance you transfer, according to the CFPB, which has expressed concern about balance transfer fees.
