August 10, 2011
My Chase Visa payment was due on the Fourth of July. As a patriotic gesture I took the day off to celebrate our independence and assumed that Chase was doing the same. I paid my bill in full, electronically, on the morning of July 5.
On my next bill, Chase Visa charged me a $25 "late fee" plus $33.90 interest.
Credit Card Piracy
A few months earlier I went to pay my MasterCard bill and saw that I owed a total of 17 cents. Misguidedly clinging to some old rule about "sums under one dollar," I decided to let it wait until it was time to pay the following month. For this I was charged a "a late fee" of $25.
It's been a year since the national Credit Card Act took effect, capping late fees at $25 for the first offense, and $35 for the second slip within a six-month period. The law also requires fees and penalties to be "reasonable and proportional" to the violation.
One particular provision caught my eye: If due dates fall on weekends or holidays, payments must be credited to the account on the next business day without penalties. So why didn't the law protect me on July 4th? It turns out that if I had made my electronic payment on the 4th it would have been credited on the 5th with no fee; however, by making it on the morning of the 5th I was legally "late" because I failed to initiate it on the holiday. Leave it to bankers to find this loophole.
Americans currently hold an estimated 610 million credit cards, and each month a relatively small percent of them are not paid on time. As a result, credit card companies collect nearly $30 billion in late fees each year. It's a business on top of a business - similar to the way airlines now make exorbitant profits from itinerary change fees, baggage fees, etc.
Meanwhile, banks are squeezing consumers as never before, with new fees for checking accounts, and virtually no interest on savings.
This month, many banks cut rates on four- and five-year certificates of deposit to historic lows.
Still, we small potatoes can't help but laugh at the recent announcement by Bank of New York Mellon Corp. that it will now charge customers a fee if they deposit too much money. Under the new deal, any client depositing more than $50 million will be required to pay the bank a penalty.
It's worth noting that Bank of New York Mellon currently has $23.6 trillion in its custody.
Meanwhile, as I fretted over my two frustrating experiences with bank credit cards, I wondered if it's really true that everyone has at least one complaint. So I asked my barber, Rick, if he has a banking beef.
"Are you kidding?" he replied. He ran into the back room and came back with his monthly bank statement from Chase.
"I've got almost two thousand dollars in there," said Rick. "And look at this line, right here where it gives the total monthly interest they paid." How much did I get? A penny."
Chase is lucky it didn't ask Rick for his thoughts.
Peter Funt is a writer and speaker and can be reached at www.CandidCamera.com