Credit cards weren't always so complicated. Back in the late 1980s, cards basically carried a $25 annual fee and 19.8 percent interest rate.
"You didn't have to worry about the fine print. Everybody charged the same thing," said Gerri Detweiler, education adviser to Myvesta.org, a financial assistance group based in Rockville. Now, consumers find if they don't read the fine print on their credit-card agreement, they can get hit by growing fees that can differ from issuer to issuer.
One reason for new and beefed-up fees is that interest-rate revenue isn't growing as fast as before because more consumers are paying off balances on time, said Robert McKinley, chief executive officer of CardWeb.com, a credit-card tracking firm in Frederick.
A decade ago, 29 percent of cardholders paid off balances monthly. Last year, 44 percent of them did, McKinley said. "It's been a steady rise. Baby boomers apparently are getting smarter as they grow older," he said. Even so, consumers are paying more in fees.
Last year, cardholders paid $21.4 billion in fees, up 13 percent from the year before, according to CardWeb. If you haven't read your credit-card agreement lately, here are some of the newer fees that may crop up:
Watch out for balance transfer fees. Consumers have been moving balances from one card to another to take advantage of low, introductory rates. Some card issuers countered by charging a 3 percent fee on transfers, experts said. In some cases, the fee is the greater of $5 or 3 percent, with a cap of $50, Detweiler said. "It certainly wipes out some of the savings," McKinley said.
Going overseas? Look out for foreign transaction fees that may be tacked onto card bills. For years, Visa and MasterCard charged a 1 percent fee over the wholesale exchange rate on overseas purchases, McKinley said.
Even so, using plastic was a good deal compared with exchange rates found at banks abroad, he said. Now, some major issuers are adding their own fee on top, pushing foreign transaction fees to 3 percent, he said. Before traveling, check to see if one of your other credit cards doesn't carry this fee, or get a card from a smaller bank or credit union that doesn't carry foreign transaction charges, experts said.
While home or abroad, make sure you understand the terms of cash advances, said Karen Christie, vice president of research at bankrate.com, a financial data and research company in North Palm Beach, Fla. The fee, which used to be 2 percent, now is in the 3 percent to 5 percent range, she said.
Many card companies also start charging interest the minute you get the cash advance, and often the interest charged is 2 to 3 percentage points higher than the rate on your card, she added.
Beware of going over your limit, too. The fee is often $29, and you'll pay that every month your balance is above the limit, Detweiler said. And companies are being stricter on what's considered over the limit. "One dollar over the limit and whammo! here comes the fee," McKinley said.
Late fees also have been rising. Last year, the average late fee was $25.20, up from $20.90 the year before, according to a survey by Consumer Action, an education and advocacy group in San Francisco.
The survey also found that more banks are charging the top fee of $29. Even if your payment arrives on the due date, it can still be late if the cutoff time is in the morning, but your check arrives in the afternoon, said Linda Sherry, editorial director for Consumer Action.
Be aware, too, a tardy payment once or more during the year could raise your interest rate, consumer advocates said. Of course, the best way to avoid late fees is to pay the bill as soon as it comes in the mail.
But if you have one of those close-call late fees, challenge it, advised Sherry. "You need to go to the companies when you don't like a fee. If you're a good customer, you need to use that power in the marketplace," she said. Consumers with less than a stellar credit history must be alert because cards issued to them may carry more fees or higher ones, experts said.
Dennis Dillinger, of Catonsville, for instance, said he damaged his credit history about five years ago when he was out of work while taking care of his ill mother.
Recently, Dillinger received an offer from First Premier Bank in South Dakota for a Visa, MasterCard or both. Under the terms printed on the back of the offer, each card carries a $119 acceptance fee, $29 processing fee, $50 annual fee and $6 monthly participation expense.
In the first year alone, Dillinger would have to pay $270 in fees to get a line of credit that may range from $250 to $1,000. He's worried that some consumers might jump at the offer and be struggling to pay for the card even before they've made a purchase. "You have people who don't necessarily read the backs of things and they are going to get hit with these fees," he said.
One of the best ways to rebuild credit is through a secured card, experts said. Consumers get a line of credit based on the amount they deposit in the bank issuing the card. While they build a track record of making timely payments, their account earns interest.
With more than 6,000 credit-card issuers, there are still good plastic deals available, McKinley said.
Check out credit unions, which often undercut banks, although they might not have the large credit lines or other services of big banks, he said. Your current card issuer may also offer you a better deal if you can point to a more favorable offer by another company, McKinley added. Check out www.bankrate.com and www. cardweb.com to learn of card deals offered nationwide.
And make sure you read the fine print, even though that may be tougher to do. The Federal Reserve, noting that card companies are cramming more information in the same amount of space, now is proposing ways to make disclosures more obvious.
You can contact Eileen Ambrose at 410-332-6984 or by e-mail at email@example.com.