Various fees like that are "allowed" to be added on when you start going delinquent, and get the amount total owned much higher. It's basically usury, in all senses of the word.
Easier to get them to swallow a limit than a complete removal (which could come later).
Then in a decade or so, we'll be having an unnuanced discussion about how racist/classist/elitist credit cards have become.
This discussion is not about the people who had a single missed payment in 5 years... this is designed to "protect" the people who serially don't make payments and ring up a huge amount of so-called "junk fees". The reality is the late fees act as an incentive to make on time payments and keep debt at a manageable level. After all, that is why you make your payments on time, right? Who actually wants to throw away money on fees?
It's not difficult to not use a credit card. I don't understand why we're so focused on removing personal responsibility as-of late, including the discussion around overdraft fees. We need to encourage more "adulting" and less careless irresponsibility. Living on a credit card and missing payments is a very bad financial sign, and it should be discouraged.
Often it's the folks with huge credit lines and carry balances that never miss payments...
> You are forgetting that prying on the irresponsible is the entire point.
The credit card market is not inherently bad. Many (most?) people use it responsibly, even if they carry a balance. We don't need to make it harder on responsible people just because some people are irresponsible and don't care to become responsible.
Anyway, credit cards are already harder to get without good credit. And yes it should be harder for people to get credit cards, but that's not in the incentive of the companies which is why they issue them anyways.
> but that's not in the incentive of the companies which is why they issue them anyways
This is a good point. I do not agree we should do anything about it though. People need to learn responsibility, and it's not the government's job to prevent them from being irresponsible.
This is the government enabling more irresponsibility.
I have a friend who's in that situation. Medical bills for his entire family have basically crushed him. Without the late fees, he'd be just scraping by with bad credit. With the late fees, he's still got bad credit. But now he's got late fees, too.
Whenever I hear these stories, I often think they're made up, or the person has spent zero effort attempting to remedy their situation (and therefore are being financially irresponsible).
Has this friend contacted the hospital/insurer and worked out an affordable payment plan? Universally they'd rather work out an affordable payment plan and get on track vs. not get paid at all. Whatever this friend is doing right now is clearly unsustainable.
What about securing a loan at an affordable monthly payment with longer terms to help lessen the monthly impact on their budget?
There are many options to get back on track - and none of them involve perpetually stacking up late fees.
If they want to collect late fees they should stop accumulating the interest. Of course they won't since that's the entire point.
You seem to be under an illusion that you cannot make money without late fees, which is false.
Heck, the late fees on my credit cards might as well be $1,000 per day or something - it doesn't matter because I make payments on time as a responsible adult.
Late fees discourage irresponsibility. That is why movie rentals had late fees, libraries have late fees, utility bills have late fees, rent, mortgage, and credit cards all have late fees. It encourages you to be responsible. Therefore, reducing late fees increases irresponsibility.
No? Oh, so by definition the people paying late fees are being financially irresponsible?
So, by lowering the consequences of being financially irresponsible, we'll get less people being irresponsible? This logic does not seem sound.
You’re asking for evidence that late fees are fees that are charged when one is late? It’s in every cardholder agreement. You don’t get charged a late fee if you aren’t late.
Libraries have most gotten rid of late fees because it didn’t do anything useful; only scared people off. (They still charge replacement cost of the book if you never return it.)
(In other words, it's worth more to the video store to rent a film to two customers for one day each than to one customer for two days.)
So, the per-day opportunity cost to the video store goes up as each day passes.
Sure, they could just charge the customer an increasing per-day overdue rate. But that's basically the same thing as having late fees anyway.
So, setting the late fees is a delicate balancing act: you want them to be a bit scary, but no too scary to potential customers.
Interest is charged for the outstanding debt, banks would make very little money on credit cards if everyone actually paid them off every month.
I'm not saying I agree with all these fees or like the banking industry, but we can't just ignore some revenue streams because others exist. They all add up to a banks quarterly financial statements, and if one goes down they will do everything they can to make up for it in other areas.
No, it is normal to carry a balance on a credit card.
The normal ("normal") way to use a credit card, before ubiquitous financing that seems to be everywhere today, is to allow you to buy something that costs a couple of pay periods, but instead of saving up and buying it later, you buy it now and pay it off gradually. It's the same way all debt is supposed to work (mortgages, business loans, etc).
You are still supposed to pay on time though, hence the late fee when you miss a payment.
I thought they are mostly for convenience, like when you can carry them instead of cash, or use them to pay in the Internet. But I always pay off the whole balance at the first occasion (irregularly, whenever I login to my bank website and notice the outstanding balance).
If you want to pay something off gradually, you usually have better options (car dealerships or shops selling electronics, and many others, they typically have their own credit offers, much better than your average credit card).
I think never in my life have I ever paid any interests on my credit card.
Individual shops like electronics, but before that department stores, etc offered charge cards (or charge coins) since the 1870's. Charge cards/accounts are distinct from credit cards because you settle the balance at the end of the period (month) and it's not revolving debt with an interest rate. Its more like Net 30 terms.
Diners Club card was introduced in 1950 as a multipurpose charge card, usable at a large selection of merchants.
Eventually banks got in the game in the 50's and 60's and that enabled true credit cards, which were like a charge card but you could carry revolving debt on them
I'd assume that no one here actually knows what the real cost of enforcing minimum payments is. Without knowing the real cost we couldn't begin to define what fee is too high (or how "too high" is even defined).
Imagine a secured card of this type, against your $1k in the bank. You could use it and never pay it off, but now you can’t use it again until you pay it down.
If you're limited to something the bank can take (and only that, excluding fraud, etc), the bank will self-regulate and not loan more than negotiable amount - cost of negotiating - this is where the 80% maximum normal home loan comes from. The bank (mostly) ignores the risk the value could go down, but understands that when all is said and done a foreclosure of a $100k house will net about $80k for the foreclosing entity.
With this you can finagle yourself down to zero (own a home, take a mortgage for 80%, squander the money, get foreclosed, have nothing) - but if the bank will lend more based on being able to go after you for the difference (recourse) than you can finagle yourself down to negative amounts.