Coulee Bank - Coulee Courier E-Newsletter

Coulee Courier - eNews for Coulee Bank Customers

Issue # 34

August 2010

Six Hidden Credit Card Fees

Obscure charges to watch your bill for

In the aftermath of new regulations that cracked down on industry revenue practices, credit card companies are looking for new sources of revenue. If you're not careful, you may get hit with a broad array of old and new fees from currency conversion fees to rewards-based fees.

And it's not over yet. Credit card companies are still hunting for ways to increase their credit card fee revenues, says Duncan Douglass, a partner with law firm Alston & Bird LLP who specializes in the credit card industry.

"There are a lot of things going on from the lowering of credit limits to switching from fixed to variable interest rates that are going to rub consumers the wrong way. These are adjustments from credit card issuers that are being made to reflect the new market reality," he adds. "And everything hasn't shaken out yet. I think it'll be interesting to see a year from now what the fee landscape looks like, because the industry is continuing to adjust to the Credit CARD Act and Federal Reserve rules."

Here are a half-dozen obscure types of fees to watch out for:

1. Reward redemption fees: Just because something is a reward doesn't mean it's completely free. This is most frequently associated with redeeming airline miles. Some airlines allow you to avoid the fee by booking your trip online and only charge you for redeeming miles over the phone or at a ticket counter. Another way to avoid these fees is if you have a ton of frequent flier miles with a particular airline and get a fee waiver as a perk.

What do banks say they're for? To pay administrative charges associated with purchasing or changing airline reservations.

What do they cost? $20 to $50, depending on the carrier.

How common are they? Very common.

2. Foreign transaction fees: A fee charged to conduct transactions that involve a foreign bank if you buy a good or service from a company in a foreign country or use your card to buy a good or service in a foreign country. These used to be called currency conversion fees because card issuers said they imposed them to cover the cost of converting a foreign transaction into U.S. dollars, but now they're called foreign transaction fees because they're charged even for deals made entirely in dollars. You don't even need to travel abroad to get whacked: All that has to happen is that a foreign bank is somehow involved. Before she even left home, Karen Mallia, an assistant professor of advertising at the University of South Carolina, was shocked to find a $25.36 currency transaction fee for an $845.52 London conference registration and lodging fee.

What do banks say they are for? To pay for the convenience of having an international network.

What do they cost? 1 to 3 percent of the charge, depending on the issuer.

How common are they? Very. Visa and MasterCard both assess the fee, but they charge your bank. Your bank may or may not pass along the fee; most do, and most also add on a "me, too" fee of their own. If you are going abroad or buying goods or services abroad, it makes sense to check with the issuer of your credit cards to see which one offers the lowest fees, says Douglass.

3. Reward recovery fees: What credit card companies give, they can take away. American Express charges customers a fee to reinstate reward points if they make a late payment. "Besides a late fee, some credit card companies are removing customer's reward points that they have earned, because the customer didn't pay on time," says Scott Gamm, founder of the personal finance website HelpSaveMyDollars.com. Some card issuers won't even let you pay a fee to get those points back, so they are gone for good, he adds. In addition, some card issuers will freeze your rewards points until your payments are up-to-date.

What do banks say they are for? To penalize you for making a late payment.

What do they cost? Typically, $29.

How common are they? Somewhat common. American Express charges the fee. In the fine print of some reward cards, the issuer reserves the right to charge these fees, but as of the publication of this article, they don't actually charge them.

4. Activity fees: So-called inactivity fees -- which are charged by issuers to cardholders who don't use their card -- are limited by the Credit CARD Act to only those cards left unused for more than a year, so the industry had to change their plans. Here's what they came up with: The fees are charged if you don't charge a certain amount on the card or they're charged each year automatically and then refunded if you charge a certain amount on the card. For instance, some Citi cards charge a $60 fee. That fee is rebated back to you once you charge $2,400.

What do banks say they are for? To ensure that you use your credit card.

What do they cost? $50 to $100 a year.

How common are they? Somewhat common.

5. Payment protection fees: A monthly fee you sign up for that provides minimum payments and suspend any finance charges if you are unemployed, ill or have some other type of qualifying hardship. Payment protection insurance can go by many names -- credit shield, credit safeguard, payment protection -- but "It's basically an insurance policy," says Ryan Himmel, CEO of BidaWiz.com, a site that provides answers to financial questions. "One of the big drawbacks to this type of plan is that you'll pay 80 to 90 cents for every $100 of your balance, which can cost $70 to $80 a month if you have an $8,000 balance."

What do banks say they are for? To cover your minimum payments if you experience a financial hardship.

What do they cost? 80 cents to $1 for each $100 you spend or carry as a balance.

How common are they? Very common.

6. Paper statement fees: A fee to receive a paper statement in the mail. Bank of America, for example, has begun to roll out a $9 per month charge for paper statements on some checking accounts.

What do banks say they are for? To pay the costs involved for the credit card company to print and mail your monthly credit card statement.

What do they cost? $1 a month.

How common are they? Somewhat. Some store cards are moving to a paper statement fees, but most big banks haven't.

The New Financial Reform and Your Credit

In the wake of the global economic crisis—at least we hope we’re now in its wake—Congress has begun to enact reform legislation meant to prevent similar crises in the future. Though there are differences, both House of Representatives and Senate legislation would contain a new consumer protection agency, and both take the same general approach to reform. While Congress is busy forging compromises on bills that could become law, let’s examine what the legislation could mean for consumers and their credit.

1. Caps on credit card interest rates and fewer fees

A consumer protection regulator is one potential outcome, and it would have authority over issuers and other financial institutions to limit or ban certain fees and rate hikes. In addition to the consumer protection watchdog, other proposals on the table include a limit on credit card interest rates to a maximum of 15 percent and a ban on credit card issuers from leveraging other fees to get around that limit.

2. Limits on debit card fees

An amendment in the Senate seeks to curb transaction fees for bank-issued debit cards, which could mean smaller banks will get pushed out of the debit card market, reducing competition and resulting in higher fees for the big banks’ cards. But some consumer advocates argue that it would ultimately foster competition among banks, passing more savings on to consumers.

3. Caps on ATM fees

Also in the works is a possible fee limit on ATM charges of 50 cents per transaction or in “reasonable” relation to the cost of processing the transaction. This would reduce independent ATM operators’ profit, and that of banks. It faces an uphill battle to pass.

4. Tighter standards for mortgages

It’s likely that there will be close scrutiny about how to reform consumer mortgage loans and the easy availability of credit. Mortgage loans could be tougher to get, in an effort to keep consumers from getting in over their heads with mortgages they cannot afford.

5. An Office of Financial Literacy?

The Senate bill would create a new Office of Financial Literacy, to offer financial education and serve as a resource for consumers in financial distress, but so far the bill hasn’t defined which consumers and how they would help them.

What the bills will look like when they become law is still undefined, but don’t expect anything to change radically: the best ways to get lower rates will still involve having healthy credit and keeping an eye on it. Whatever your goals for your credit in the next few months or years, monitoring it is always a wise course of action.

Second Chance Tax Savings

Tax breaks you may have missed in 2009

Did you claim every tax break that you were entitled to when you filed your 2009 federal tax return this year? There are so many new tax breaks that it would have been easy to miss a few. But you can set things right by filing an amended tax return now, which could put more money in your pocket in a matter of months.

Making Work Pay credit.
Many taxpayers were confused by the new form used to claim the Making Work Pay credit -- a 6.2% payroll tax credit worth up to $400 for individuals and $800 for married couples. (The credit is phased out for those with high income, starting at $75,000 for single taxpayers and $150,000 for couples filing a joint return.)

Although most employees received the benefit of the credit throughout the year in the form of lower tax withholding, you had to file Schedule M to claim the credit and adjust your tax bill accordingly. But millions of people who should have filed one didn't. The IRS tried to catch the error and adjust the returns to reflect the credit, reducing the final tax bill. (You would have received a notice from the IRS if it did.) Review your 2009 tax return and, if you didn't claim the credit but are eligible for it, amend your return.

Breaks for non-itemizers.
Another new form -- Schedule L -- also caused some confusion. Taxpayers who didn't itemize their deductions could use this form to claim an enhanced standard deduction for net disaster losses, sales or excise tax paid on the purchase of a new car after February 16, 2009, and a property-tax deduction of up to $500 ($1,000 for married couples filing jointly). If you missed one of those tax breaks, file an amended return.

Home buyer's credit.
Another case in which you may want to file an amended return: You bought a house this year and qualify for either the $8,000 first-time home buyer's credit or the $6,500 credit for longtime owners who bought another principal residence. But you don't have to wait until you file your 2010 tax return. Special rules allow you to claim it on your 2009 return as long as you signed a binding contract before May 1, 2010, and closed on the home before Sept. 30. You'll also have to file Form 5405, "First-Time Homebuyer Credit and Repayment of the Credit," and include a copy of your settlement sheet when you file your amended return.

Education breaks.
If you paid college tuition and related expenses in 2009, you had several tax breaks to choose from to offset some of those costs. Did you pick the best one for your situation? For most people, the American Opportunity Credit, worth up to $2,500 per student, was the logical choice. But if you had a freshman or sophomore who attended school in one of the seven Midwestern states that were declared federal disaster areas, you might be eligible for an enhanced Hope credit worth up to $3,600 (but lower income-eligibility limits apply).

Checking and Reading Your Credit Report

If you are applying for a loan or credit, records of your previous dealings with someone else's money are vital.

Whether you get that credit card may depend on a network of credit reporting agencies that either share information with, or are owned by, three major credit bureaus. Credit reports are critical factors in credit scoring systems that lenders use to issue credit cards, as well as mortgages or other loans.

So, if you're considering making a major financial move, it's a good idea to check your credit report to know where you stand. That way you can be aware of, and if necessary take care of, problems before they derail your plans.

If you find problems, or if potential creditors discover them, take steps to rebuild damaged credit and clean up that record.If you've made mistakes in paying previous loans, bounced checks, made late payments or had other problems, you may still be able to reduce the amount of damage they will do to your credit with explanations or some basic repair.

Obtaining copies of your credit reports is easy. The 2003 Fair and Accurate Credit Transactions Act guarantees everyone one free credit report from each of the main credit reporting agencies -- Equifax, Experian and TransUnion -- per year.

You must request your free credit reports through a centralized source. To order online, visit annualcreditreport.com. By phone, call (877) 322-8228. Or you may complete the form on the back of the Annual Credit Report Request brochure and mail it to: Annual Credit Report Request Service, P.O. Box 105283, Atlanta, GA, 30348-5283.

On October 3, 2008, FDIC deposit insurance temporarily increased from $100,000 to $250,000 per depositor through December 31, 2013. For more information please contact Coulee Bank or visit www.fdic.gov.

Beginning July 1, 2010 Coulee Bank will no longer participate in the FDIC’s Transaction Account Guarantee Program. Thus, after June 30, 2010, funds held in non-interest bearing transaction accounts will no longer be guaranteed in full under the Transaction Account Guarantee Program, but will be insured up to $250,000 under the FDIC’s general deposit insurance rules.