CREDIT CARD LATE FEES
New Credit Card Late Fee Rule Driven By Politics, Not Reality
The White House and CFPB have proposed a new rule that would limit credit card late fees to $8, part of a misguided campaign conflating hidden fees in other industries with clearly disclosed credit card fees.
HERE ARE THE FACTS
Transparent
America’s leading banks engage in rigorous underwriting practices and are required by law to have clear and conspicuous disclosure of material terms and conditions, aimed at empowering consumers to make informed financial decisions.
Competitive
Banks are incentivized to constantly review and modernize products and services – and potential fees that come along with them – to meet evolving demand and attract new customers, fostering greater transparency and choice for consumers.
Valued
Millions of American households and small businesses rely on credit cards to make ends meet, pay for emergency expenses, and cover the cost of everyday purchases. Consumers also value the rewards they earn when using their credit cards and the certainty of knowing their transactions are safe and secure.
What will happen if the late fee proposal goes into effect?
Consumer costs go up.
Banks may be forced to increase rates and offer fewer credit options to mitigate the risk associated with more missed payments. All cardholders, including the 74% who pay on time, could see lower credit lines, tighter standards for new accounts, and increased annual percentage rates (APRs). The CFPB admits in its proposal that some consumers “may pay higher maintenance fees or interest…”
Your credit may be harmed.
Reducing late fees would remove an important motivation for consumers to make on-time credit card payments. Notably, missing payments can negatively impact a consumer’s credit score by as much 100 points and could stay on consumer’s credit report for several years, affecting their ability to qualify for a home or auto loan.
What do Americans think?
A majority of Americans (nearly 60%) believe credit card late fees are legitimate, according to a CBA survey released in April 2023.
Shockingly, the survey also found that most people fail to understand the consequences if they pay late, which could happen much more frequently if the fee is lowered. Nearly half of Americans (48%) mistakenly believe nothing happens if they pay their credit card bills late.
“Fuzzy Math”
Washington Post Fact Checker Glenn Kessler debunked claims that consumers would save billions. He found that the claim consumers would save money is “fuzzy” and “not exactly kosher.”
Importantly, Kessler also concludes that “a lower fee might harm some cardholders.” This is because the $8 fee doesn’t cover bank costs to offer the credit cards and therefore, if enacted, banks would have to raise costs elsewhere.
Facts
Matter
*A growing series pushing back on major, industry-reshaping policy changes designed by press releases full of headlines distressingly removed from fact.
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COMPETITION
FEES
COMMON SENSE
COMPETITION
REWARDS
SUPPORTING CONSUMERS
COMPETITION & INNOVATION
BASIC MATH