Ed Tolson: “It used to be that if you missed a payment, you were assessed finance charges at the high interest rate you understood when you got the card. Now, when a payment is missed or late, they tack on this exorbitant ‘late fee.’ Is there some consumer advocate we can look to for a remedy to this mess? The fees go beyond the realm of usury. I recently was a couple days late on one card (my fault for being on vacation) and was assessed a $29 fee on my outstanding balance of $9.95. It’s just incredible to me. We would seem to need some government intervention (shudder!) or a major grass roots campaign to shock these money-grubbing morons back to their senses. Any thoughts?”
Well, Ed, the simplest thing might be to send $100 extra, say, and run a perpetual $100 credit. The lost interest, after tax, on $100 is — what? Three bucks? A lot less than even a single $29 charge. And if you are someone who, like me, never pays interest on a credit card, then letting them enjoy that foregone three bucks a year isn’t much to pay for the convenience of the card and the float we get from the time we make a purchase to the time our check to the credit card company clears.
I’m actually not sure how various cards would treat you if you had a $100 credit and then they sent you a bill for $110 — for a net of $10 — and you didn’t pay the $10 on time. They might still try to charge you $29. But it seems to me even they might agree this makes no sense.
Still, two other ways to do this would be (a) to run a credit of even more than $100, especially if you know that a vacation looms; (b) set up an automatic $100 a month (say) payment to this card, if you use CheckFree or one of the other services that allow for automatic bill payment. Separately, you’d pay the bills as received (generally, for $100 less than the total, because your $100 payment would be reflected as a credit) . . . but if you ever failed to do it on time, at least they’d have gotten the $100 on time, and you’d have avoided the late fee.
All that said: Yes, it’s highway robbery, and abusive, and an easy target, I should think, for regulators and class action lawyers. Then again, no one forced you to take the credit card or agree to its terms — or to pay late. The best solution may be the free market: People who don’t like the charge should switch to a card that doesn’t have it. What was particularly galling about the GM Card, if Deep Plastic is to be believed, is that late fees were routinely charged to people who paid on time. That really is unconscionable.
A Vote FOR the GM Card . . .
Steve Strunk: “I wanted to let you know that we have had a GM card for several years and have had no problems with them or their servicing agency. They were quite helpful in a billing dispute I had with a merchant and I have twice redeemed points toward purchases. We keep our cars for many years (my GM truck is almost 10 years old and never had a major problem) and therefore feel that buying new (and getting a full 3 year warranty) is best for us. We buy everything — even groceries — on the card and then pay it off each month. Once we accumulate the maximum $500 in credits each year we switch to an airline miles card for the remainder of the year. The only problem I have with credit cards in general is that all of them keep cutting the grace period. It’s to the point where you have to mail payment the day you receive the bill in order to get it there on time. However, I am not going to let that stop me in taking the free money or miles that they give away. Just wanted to let you know that someone has had good experiences with the GM and other ‘free’ stuff cards.”
. . . And Another Vote Against
Shane Millburn: “After receiving my GM Card bill with an unexpected late fee and entering an item in my dayplanner to call The GM Card first thing Tuesday morning I was pleasantly surprised to find more GM Card bashing on your web site. Forgive me for beating a dead horse, but I need to tell my story.
“I have been a loyal GM card user for six years. My charge volume for the first four years was $20K/year and $10K/year for the last two years (they changed the rules after the first four years reducing the maximum credit towards a GM vehicle). In six years I missed one payment (I wrote the check but it was lost somewhere and I had to pay to cancel it – no late fee was charged by The GM Card). Other than that one lost payment, not a flaw in my payment record with them. Two years ago I used my GM Card earnings to help buy a very nice Chevy. I was a happy customer (and still am happy with the car). I thought The GM Card and I were quite good friends.
“Imagine my dismay when my latest statement had a $29 late fee. After checking into my records I found that I mailed the check on 7/14/99, it was due 7/16/99, and was posted 7/20/99. The check was posted prior to the next statement closing date. Guilty as charged I called The GM Card people to apologize and ask for the charge to be reversed. After calling their “customer service” line, and entering my account number, I was promptly told that they had high call volume and no one could talk with me. I was then disconnected. I was amazed! I expected a long wait, but they just hung up on me! I tried it again just to make sure I didn’t do anything wrong — same result.
“I called again and this time I entered the lost or stolen card option and was connected to a nice customer service agent. She asked why I couldn’t pay my bill on time and then explained the late fee sequence. Here is the math on The GM Card: 11 days from the closing date until arrival of the statement at my house, seven days for the post office to get the payment back to them and be posted in their operation. That leaves only eight days for me to pay it or be hit with the late fee. And NO she didn’t offer to reverse the $29 fee even after I indicated that I wanted to close my account because of it. The nice customer service agent forwarded me to the account closer who very efficiently closed my account (I got the impression that this was a common thing).
“The bottom line on The GM Card is that they don’t want to keep their customers. I am willingly forfeiting $1K in GM Card earnings to close this account and deal with a customer oriented card operator that doesn’t gouge their customers.”
Oh, no! You let them get away with $1,000? You see? That’s their strategy! They try to make you so crazy over $29 you give them $1,000! The rep probably got a bonus! Try to get it back!
Quote of the Day
Very few American investors buy any stock for the sake of something which is going to happen more than six months hence, even though its probability is exceedingly high; and it is out of taking advantage of this psychological peculiarity of theirs that most money is made.~John Maynard Keynes
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