Credit cards with high fees and interest rates can seem like a good idea for borrowers with poor credit, but hidden consequences can put people in a bad financial situation. Credit cards with hidden fees, sometimes called “fee-harvester cards”, have lower credit limits but high fees. Companies who offer fee-harvester cards are typically targeting financially vulnerable people with limited access to credit, and in some cases, charging borrowers fees illegally.
One company was forced by the Consumer Financial Protection Bureau (CFPB) to refund $2.7 million to nearly 100,000 customers for illegal or hidden fees. In addition to refunds, the company responsible was ordered to pay $250,000 in fines.
Some fee-harvester cards are hoping that borrowers will not read the fine print. For example, the lender might charge a $75 annual fee on top of a $12 monthly fee. In one case, a company offering a fee-harvester card gave borrowers a $250 limit, but with so many upfront fees, the limit fell to $72. This was illegal because the CFPB limits card fees to 25 percent of the initial credit limit.
Should I File for Bankruptcy to Eliminate Credit Card Debt?
Credit card payments can quickly overwhelm borrowers, and fee-harvester cards are only a symptom of a larger problem for many Americans. Extensive credit card debt can make car payments, student loans and mortgages more difficult to pay.
Fortunately, credit cards issued by banks such as Visa, Mastercard, Discover and American Express, are known as “unsecured debt”, meaning that if a person qualifies to file for Chapter 7 or Chapter 13 bankruptcy, the debt might be discharged. This is a very different treatment than most store issued cards (e.g. Sears, Best Buy, Nebraska Furniture Mart) which are actually secured.
Our readers can learn more from the bankruptcy attorneys at The Sader Law Firm by visiting our YouTube page. For more information on Chapter 13 and Chapter 7 bankruptcy, please continue to explore our website.
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Did You Know? According to the U.S. Federal Reserve Bank of Kansas City, Kansas consumers have an average of $16,127 in consumer debt, excluding mortgages.