New Fees for Credit Users

Credit Card companies are targeting consumers with new fees, higher rates and swifter penalties. They are taking special aim at "freeloaders" - an industry term for those who don’t pay interest and always pay their account balance off on time.

Why crack down on the most credit worthy consumers? Credit issuers’ profits have declined and they have no one else to go after. Outstanding consumer debt tops $450 billion, an all time high. More than one million Americans filed for bankruptcy last year. Card issuers are being forced to write off these bad accounts entirely, a huge drain on industry profits.

Card users who seldom pay fees or interest aren’t lucrative for the issuers. The industry, hungry for new sources of profit growth, seems determined to change that.

Source: Your money. (1997, March). Consumer Reports, 68.

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