Fee Harvesting
May 16, 2008 · Print This Article
During the course of a conversation with a young woman about her debt, she gave me some very interesting information about one account she had with a balance of about $475. It turns out she opened this account about 4 months ago with a very large and popular credit card company. She did so in her last attempt to manage her debt on her own and avoid having to enroll in a debt program or filing bankruptcy. She was hoping that this card, which only had a $500 limit and low interest for the first 6 months, would give her some cushion to pay for increasing food and gas prices while she the juggled the payments on her other 6 accounts. She admitted to me that this was not a well thought out plan to begin with and I had to agree with her.
Anyway, she had the card for about a month and she hadn’t even had a chance to charge anything yet when she received her first statement. There were 4 charges on the account-an initiation fee of over $100, an annual fee to be in a rewards program for $25, another monthly maitenance fee of $10, and a set up fee of $25. She had already accumulated over $150 of debt with this company and she not even signed the back of the card yet. Needless to say her struggles with her budget and debt did not improve.
This is an example of fee harvesting and it’s something that I’m coming across more and more as I talk to clients about their experiences. Fee harvesting generally refers to a credit card company’s practice of applying fees to a customer’s account so that the interest drawing balance continues to grow even if the person is no longer actively using the account. Simply put, it allows a creditor to charge you a fee and then charge you interest on the fee. Highly profitable for the creditors, and highly dangerous for individuals who do not read the fine print when they sign up for these offers that sound too great to be true.
Technorati Tags: fee harvesting, interest rates, credit card practices, budgeting, bankruptcy, debt options, credit limits, debt consolidation
Written by Mei Ho · Filed Under Credit Industry Practices
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[...] Mile High Top Sites | Make Money Online | Family Tree Genealogy | Free Music Downloads | Download DV… wrote an interesting post today onHere’s a quick excerpt During the course of a conversation with a young woman about her debt, she gave me some very interesting information about one account she had with a balance of about $475. It turns out she opened this account about 4 months ago with a very large and popular credit card company. She did so in her last attempt to manage her debt on her own and avoid having to enroll in a debt program or filing bankruptcy. She was hoping that this card, which only had a $500 limit and low interest for the firs [...]