True Credit Card Interest Rates

I had to extend a recent business trip and came back a few days later than I intended. I sat down to pay bills and it was the day after one of my credit cards had a payment due. I was hit with a $39 late fee, a $9.95 epay fee, and interest retroactively was jacked up to 21%. All together, I was hit with a charge of 1.27% of my balance for being one day late. That works out to an annual yield of 10,000%. Nice for them. Makes one consider supporting regulation.

6 thoughts on “True Credit Card Interest Rates”

  1. Call the CC company Sam, the number on the back of the card. Speak to a manager if necessary. If also necessary, threaten to move you balance to another card.

    I had a one day overage a year ago and they fixed the overage charge ASAP with no fuss at all.

    If your credit history is good, you can almost surely fix this with a call.

  2. More analysis: The total fees were actually on the order of 100% of the minimum payment which was all that was due. So the actual figure is 10 billion percent annual yield. Ten billion googleplex percent annual yield that is. It’s a good thing they only do that once every couple of months.

    Mike: Good point. Actually, I already moved the balance to another card. But when I complain, I frequently can get certain charges reduced or eliminated. I see that as another argument in favor of regulation. Uniform prices and terms reduce transaction cost and increase transparency of the market prices.

  3. What happened to the freemarket libertarian we know so well?

    If you don’t like them, change card providers, change
    banks, go out on the market, or even refuse to buy things.

    I’ve got a Visa Platinum card i never use, just because
    i hate the provider. I love making them send me a bill
    for zero dollars every month.

    If you start talking about the need for regulation
    you will find yourself on that slippery slope towards
    being a democrat

  4. Yes, it’s true. I am moving from free market libertarianism to the middle of the road. I’m not for price controls, or a usury law that kicks in at 25% per year, I am for standardizing terms quoted to encourage comparison shopping with no price controls and perhaps a usury law that kicks in at 50% per day (10^66 % vs. 10^112 %). That would be the effect of having missing a payment by a day cause penalty rates to be only prospective and not retrospective. Such a proposal is part of the bills under consideration.

    Free market capitalism curbs the worst excesses of democracy and vice versa.

  5. As a result of the CARD Act reforms that went into effect on February 22, credit card companies are projected to incur $12 billion in annual losses. But we all know that credit card companies are far too imaginative to let this happen. The reforms require the credit card companies to give you 45 days notice before rate increases, and those increases cannot be applied to existing debt unless you miss payments for 60 days. In addition, there have been new restrictions placed on how they can market to college students under 21 years old. This all translates to nothing more than a bump in the road for card companies. Old methods of revenue generation will be replace by new ones in the form of lots of fee

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