- Americans paid $130 billion in interest and fees in 2022, according to a new report from the Consumer Financial Protection Bureau.
- Late fees remained the most significant penalty imposed on cardholders.
- “Even though the 2022 numbers are this big, I don’t think anyone should be surprised if the 2023 numbers get even bigger,” said Matt Schulz, LendingTree’s chief credit analyst.
American cardholders paid $130 billion in interest and fees in 2022, according to report a new report From the Consumer Financial Protection Bureau.
Last year, cardholders were charged more than $105 billion in interest and more than $25 billion in fees. This amount represents “the highest amount of interest and fees ever measured by CFPB data,” according to the report.
a separate analysis Credit card holders paid approximately $163.89 billion in fees and interest last year, according to an estimate from WalletHub. The site evaluated data from the Federal Financial Institutions Review Council.
Between 2018 and 2020, such expenses were approximately $120 billion per year. 2022 report CFPB.
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“Even though the 2022 numbers are this big, I don’t think anyone should be surprised if the 2023 numbers get even bigger,” said Matt Schulz, LendingTree’s chief credit analyst.
The Federal Reserve has made four rate hikes so far in 2023, and while the central bank is not expected to raise rates again at next week’s meeting, another rate hike may not be completely off the table this year.
The CFPB found late payment fees to be the “most significant” credit card fee in terms of frequency and cost. Consumers paid about $14.5 billion in such fees last year, representing a return to pre-pandemic levels, the agency said.
The Biden administration has focused on combating what it calls “unnecessary fees” in every aspect of consumers’ lives, including certain credit card penalties with the Federal Trade Commission and CFPB.
Some credit card companies charge as much as $41 for missed payments. The goal is to reduce late payment fees to $8, ban late fee amounts that exceed 25% of the cardholder’s required payment, and end the automatic annual inflation adjustment, the CFPB said in February. expression.
These costs are significant for low-income households who can afford to pay these fees on an ongoing basis, accounting for nearly a few hundred dollars over the course of a year, Schulz said.
The proposed changes are intended to fill gaps in the Credit Card Accountability Accountability and Disclosure Act of 2009, or CARD Act. The law placed restrictions on credit card companies, such as price controls on penalty fees and certain conditions under which these penalties could be charged. However, there are no restrictions on how much APR a company can charge or any language on late fees.
The CFPB found that cardholders carrying a balance paid about 20% of their average statement balance in interest and fees last year. WalletHub estimates that cardholders paid an average of $76.27 in fees and interest per credit card account in the fourth quarter of 2022.
It is worth looking for ways to reduce these additional costs.
“Life is very expensive in 2023 and will not get any cheaper in the near future,” Schulz said.
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Cardholders can “seek assistance from card issuers,” Schulz said. Those who make it are “more successful than most people think,” he said.
For example, more than 3 in 4 cardholders who requested a lower interest rate on one of their credit cards last year had their credit card interest rate reduced. according to this to LendingTree. According to a 2022 WalletHub survey, almost 90% of people who called their organization about a late fee were able to waive it.
If you ask your card issuer to lower your interest rate, they may run a credit check to see if your financial situation has changed since you opened the card. But the savings you can realize with a lower interest rate may be worth the “small hit to your credit score,” Schulz said.
Consider setting up automatic payments for your credit card statements so you don’t miss a payment or accidentally pay late.
But don’t skimp on your monthly statements just because “autopay isn’t perfect,” Schulz said.
Direct debit makes a lot of things easier, but it still doesn’t relieve people of the responsibility of keeping an eye on things.
Matt Schulz
Chief credit analyst at LendingTree
If you don’t keep track of the payment due date, you may still have to pay late, and if your balance is higher than expected, you may not be paying enough to meet the minimum amount. To avoid paying more interest and fees, make sure you cover the full statement balance when paying.
“Automatic payment makes a lot of things easier, but it still doesn’t relieve people of the responsibility of keeping an eye on things,” Schulz added.
You may also want to change your due date to make it more affordable, said Sara Rathner, credit card expert and writer for NerdWallet. This way you’ll be aware of how much money you have in your checking account before the automatic payment goes through.
Take advantage of deals to reduce surprise charges and get the information you need about your card, says Winnie Sun, co-founder and managing director of Sun Group Wealth Partners in Irvine, California.
Make sure you’re aware of your expenses, whether that means checking your statements regularly or setting up push notifications every time your credit card is charged, said Sun, a member of CNBC’s Council of Financial Advisors. This can help you spot fraud and stay aware of increased fees and interest.
Finally, if you haven’t reviewed your credit card company’s terms and conditions in a while, contact your card issuer’s customer support and ask for a list of the fees and the cost of each.
“You can always contact your card issuer and ask for basic information about the card you have,” Schulz said.
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