Minimum finance charges are on the rise as credit issuers continue to search for creative ways to increase fee revenue while operating within new rules set forth by Congress.
Applied when a finance charge on a credit card balance would normally fall below the stated minimum, these charges are small, can easily go unnoticed by consumers, and aren't restricted in any way by the CARD Act. However, they can also quickly add up to sizable profits for credit card companies.
Based upon data from the 2007 Survey of Consumer Finances, the Center for Responsible Lending estimates that minimum finance charges cost consumers $430 million annually. But recent data indicates the charges are rising fast over the past few years, with some lenders even charging up to $2 as their new minimum.
$2 may not seem like much of a fee, but why pay $2 when you really owe just 25 cents in interest? This is yet another example of why it's so important to pay your credit cards in full each month and never carry a balance, even if the amount is small.