Penalty Fees Getting Stiffer on Consumer Credit Cards Critics Say Hikes Are Too High for Offenses

Article excerpt

Credit card companies are starting to make sloppy users pay dearly for their mistakes.

After years of lenience for fear of losing customers, banks and other card issuers are now driven by a different motive: the thirst for fee income. They're boosting rates for tardy payers and raising penalty fees for spenders who exceed credit limits.

Credit card experts and cardholder groups are calling the new fees exorbitant. They also accuse issuers of seducing customers with offers of low rates and burying the charges in fine print.

Cardholders can end up with an annual percentage rate twice as high as the one they signed up for. On top of that, they have to pay multiple penalty fees if they pay late or surpass their limit a few times.

"If a person is chronically late, that should be penalized," said Ruth Susswein, executive director of Bankcard Holders of America in McLean, Va. "But based on what we've seen, a lot of the time the punishments don't fit the crime."

Issuers counter that the fees offset the higher costs associated with servicing negligent customers and that they encourage people to clean up their act.

Citibank and AT&T, the nation's two largest credit card issuers, are among those cracking down on cardholders who break the rules. …