WASHINGTON – Late fees for credit card payments have jumped, but card issuers have done a poor job of explaining their policies on fees and penalties to consumers, a new study by congressional investigators has found.
The report released Wednesday by the Government Accountability Office, Congress’ investigative arm, describes the fees, interest rates and disclosure practices of 28 popular credit cards. It found that late fees averaged $34, up from $13 in 1995, while some credit card issuers impose penalty interest rates of more than 30 percent on consumers who pay late or exceed the credit limit.
“Millions of Americans depend on credit cards to pay their bills and buy essentials like groceries or gas. Unfair or confusing credit card practices take advantage of working families,” said Sen. Carl Levin of Michigan, the senior Democrat on the Senate’s investigative subcommittee, who had asked the GAO to conduct the study. “This report shines a needed spotlight on excessive credit card fees, unfair interest rates and inadequate disclosure practices that ought to be stopped.”
Credit cards have become a ubiquitous part of the culture, with an estimated 690 million cards in Americans’ wallets and more than $1.8 trillion charged on them in 2005. Consumer groups have frequently criticized credit card fees as excessive. The banking industry maintains that the costs of using a card can vary according to the risk posed by the account holder.
Although interest rates vary widely, the GAO report says, “many cardholders now appear to have cards with interest rates less than the 20 percent rate that most cards charged prior to 1990.”
In addition, the study found, holders of nearly half of all active credit card accounts paid little or no interest in 2005 because they generally paid their balances in full.
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