If you own a credit card from Discover, American Express or Citi, the odds are good that their penalty practices can hurt your efforts at debt consolidation. A new survey by a credit-card tracking site reported that most major credit card companies still do a poor job of explaining to their customers the way they assess late fees and levy financial penalties. This is particularly disappointing because the federal government’s Credit CARD Act, passed last year with great fanfare, was supposed to revamp these processes. The legislation was supposed to make the penalty structures of credit card companies easier for consumers to understand.
Late Fees, Debt Consolidation
During these challenging economic times, many consumers have had to turn to debt consolidation loans to get a handle on their outstanding revolving debt. Unfortunately, any debt consolidation efforts that consumers take, whether they’re working with companies that promote Christian debt consolidation or for-profit consolidation, can be easily scuttled by unexpected late fees and penalties. According to the financial Web site CardHub, a growing number of consumers are receiving unexpected penalties because their credit card issuers still haven’t explained clearly what consumers have to do to avoid these fees.
According to CardHub, six of the 10 biggest credit card providers earned poor scores when it comes to their penalty practices. American Express did especially poorly in the study, according to CardHub. The company racked up ratings of “poor” in all four categories that the Web site studied, including how clearly the company explained what triggers a penalty, to what portions of consumer balances that penalties apply, what steps consumers can take to move back to their non-penalty interest rate and what APR changes are allowable in the first year that consumers hold their new cards. Of course, American Express wasn’t alone in its poor rating: Citi, HSBC, Bank of America and Discover all earned poor ratings from the survey.
Debt Consolidation Woes
When consumers turn to a debt consolidation company, it’s usually because their credit card debt has become too overwhelming for them to handle. They’re tired of the collection agency calls, and of dreading trips to their mailbox. Taking out a debt consolidation loan is no easy decision; doing so lowers the credit scores of consumers, while many debt consolidation companies also charge high fees and interest rates. It’d be a shame, then, if more consumers turned to debt consolidation loans in part because unexpected penalty fees added to their credit card bills. Federal legislation was supposed to prevent this. So far, though, it doesn’t appear to have done so.