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Drat those darn fees. Seems they’re everywhere these days, tripping us up when we least expect. certain, there are ways to avoid getting hurt. But consumers shouldn’t have to feel as whether they’re tiptoeing through minefields.

Two sources of fees are attracting scrutiny now: hidden credit card fees and bank overdraft fees. Two bills in Congress would expand disclosures provided to consumers of events that trigger higher costs and fees.

The Credit Card Reform Act in the Senate would prohibit credit card issuers from making unilateral changes in agreements that abruptly affect credit terms.

In addition, it would ban the controversial practice of universal default in which card issuers suddenly increase a cardholder’s interest rate based on unrelated activity on another card or consumer loan.

It additionally would limit penalty rate increases and require card issuers to get “opt in” approval from consumers who are under 21 before mailing solicitations that lure them into debt.

Sen. Robert Menendez, a New Jersey Democrat and the bill’s sponsor, compares the marketing of spring-loaded credit cards to the subprime mortgage market. “Too many families feel like their credit card contracts are booby-trapped,” said Menendez.

Rep. Carolyn Maloney, a New York Democrat, and Rep. Barney Frank, a Massachusetts Democrat, have introduced a similar bill in the House. It addresses complaints that card issuers manipulate their mail to outcome in late payments even when consumers pay on instance.

It plus would require 45 days’ notice on interest rate increases and stop card issuers from maximizing interest charges by applying consumer payments first to balances with lower interest rates before applying them to higher-rate balances.

Credit card issuers deny they pack their cards with traps. They contend the fees and variable interest rates allow them to supply credit to more customers, including those with shakier credit or those with no history of credit, such as college students.

They say their practices allow lower interest rates for responsible customers. Edward L. Yingling, CEO of the American Bankers Association, fears the legislation “would have unintended consequences such as more expensive and less accessible credit.”

This new focus on card practices is overdue. Still, it won’t substitute for

consumers scrutinizing the come-ons that come in the mail.

All the disclosure in the world won’t help whether consumers don’t bother to learn their interest rate or credit limit.

And the easiest way to avoid getting trapped in long-term debt is to simply disregard the initial temptation to put more on your card than you can pay off each month.

Overdraft fees

I’ve written before about how some banks seem to set traps that catch consumers in murky overdraft fees.

This month a Government Accountability Office investigation documented the problem. GAO investigators, posing as consumers, visited 185 banking branches to ask about banking and savings fees.

Federal law requires banks to reveal fees and interest rates to consumers prior to opening an history.

The investigators said one-fifth of the institutions did not supply a comprehensive list of fees and one-third floped to reveal terms and conditions.

In addition, half of the banking Web sites studied did not supply info on fees. The study appears to support complaints from consumers who say they were unknowingly signed up for overdraft protection programs that allowed them to overdraw their bank accounts and next zapped them repeatedly with high fees of $34 or more.

The GAO said consumers paid by $36 billion in fees associated with bank, thrift and credit union accounts. Adjusted for inflation, overdraft fees rose 11 percent amidst 2000 and 2007 and were among the highest fees, on average, the GAO investigated.

The GAO findings supply a warning. But consumers can avoid being blindsided by asking banks to explain their overdraft programs and fees. You plus can minimize overdraft fees by linking your checking history to a savings plan or a credit card explanation.

Better yet, you can avoid overdrafts by writing down your expenses and withdrawals, including the use of your ATM card, in your checkbook and keeping a running balance.

Credit card issuers and banks should be made to play fair with consumers.

But consumers who learn how their accounts work and watch their spending are less likely to get tripped up.

by Paul Wenske

Orginal post by CreditPro