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- Katie Couric
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We all love the convenience of credit cards, but beware of the hidden fees. Credit card companies are charging fees for those who don't pay on time, and now in some cases they're also charging customers who pay too promptly.
"Hidden Credit Card Fees." Katie Couric, correspondent. NBC Today Show. NBCUniversal Media. 1 Apr. 1997. NBC Learn. Web. 4 November 2017.
Couric, K. (Reporter). (1997, April 1). Hidden Credit Card Fees. [Television series episode]. NBC Today Show. Retrieved from https://archives.nbclearn.com/portal/site/k-12/browse/?cuecard=42884
CHICAGO MANUAL OF STYLE
"Hidden Credit Card Fees" NBC Today Show, New York, NY: NBC Universal, 04/01/1997. Accessed Sat Nov 4 2017 from NBC Learn: https://archives.nbclearn.com/portal/site/k-12/browse/?cuecard=42884
Hidden Credit Card Fees
KATIE COURIC, co-host:
Bam! Your credit card company hits you with a fee for being a freeloader. What began last fall as an ominous trend is now growing fast. Robert McKinley is president of Ram Research, which monitors the credit-card industry.
Nice to see you, Mr. McKinley.
Mr. ROBERT McKINLEY (Ram Research): Good morning.
COURIC: Now, we've been told for years, or it's been recommended, that we pay our bills in full rather than letting interest accrue. And now all of a sudden we're getting hit by fees and considered freeloaders by credit card companies. How come?
Mr. McKINLEY: Well, there's some fundamental changes going on in the business. We have more consumers who are struggling with credit-card debt. The number of delinquencies in the country has actually doubled over the last five years. So you have that group of slow payers. On the other hand, we have these aging baby boomers who are moving to convenience use. They're paying their bills in full. In fact, five years ago, 29 percent of us paid those bills in full. Today it's 36 percent and rising.
Mr. McKINLEY: So we have the people who pay too promptly and those who pay too slowly, and there's a profit squeeze for these card issuers.
COURIC: Why are the people who are paying too promptly annoying the credit-card companies, because they're not making any money off of them?
Mr. McKINLEY: That's right. It's not profitable. When you look at, say, the average balance of $2,000, and if you pay the average rate of 18 percent, you're shelling out about $400 a year in interest costs. On the other hand, if you just charged, say, $3,000 a year, which is very typical, you're generating about $25 in revenue to the card issuer. So you can see the big gap. And in some cases, it's just simply not cost effective.
COURIC: Well, it's not as if the consumers out there don't have a lot of choices. There's something like 7,000 different credit cards available. Aren't--aren't credit-card companies who are slapping these fees on consumers worried that we'll take our business elsewhere?
Mr. McKINLEY: Well, there might be 7,000 issuers of bank credit cards in the country, but the industry is very concentrated. You look at the top 25 issuers, that's three quarters of the market. So it's the big players right now that we're seeing that are--are phasing in these fees. In fact, they're charging fees for even strange things, like a bank in the south tried last week to charge $10 to close your account. Another bank was trying to charge $5 if you didn't use your card in six months. They had such a backlash from it that they rescinded the fees. But nonetheless, I think we're going to see more of those fees. For example, fees for customer service. The freeloading thing--you're not going to get any freebies on your credit card anymore.
COURIC: Are banks in such trouble? Why are they doing this to us?
Mr. McKINLEY: Well, it's true that some of the rebate programs, which are very popular, where you get air miles, some of them are actually losing money and have actually closed down. There's the Southwest Bell card closed up last fall. We also had an airlines card from Old Kent Bank called Card Miles, very popular...
Mr. McKINLEY: ...losing money. They closed the door. I think we're going to see more of that. Again, it's that shift to more convenience users that's really causing or sort of reeking havoc with the bankers.
COURIC: We've got some tips we want to go through very quickly if we could. Pay your bill in full, even if you get slapped with a fee?
Mr. McKINLEY: Well, you could shop around. If you--your card company is going to hit you with a fee, again you do have other choices. But in some cases, it may be unavoidable, especially if you're going to get something in return, like, say, air miles.
COURIC: Should you pay everything but like a dollar on your balance?
Mr. McKINLEY: No. That's the worst thing to do. Because once you do that you lose your grace period. Interest starts accruing from then until you pay it in full. So that would be a mistake.
COURIC: And abide by the rules and look at the--at the fine print, right?
Mr. McKINLEY: Yes. If you pay your bill even one day late today, you cannot only get hit with a high fee of $20 to $30, if you do it more than twice, you may find your whole interest rate going up to 25, 30 percent. This is all part of the punitive pricing that's emerged in the business.
COURIC: All right, Robert McKinley. Mr. McKinley, thanks so much for coming in.