Annual Fees Are Back As Credit Card Companies Face Reform

Imagine paying for the privilege of spending your money. Sounds a little ridiculous, doesn't it?

But it could become reality for millions of credit card holders once the last part of credit reform legislation goes into effect this February. Don't get me wrong - the regulation changes are much-needed. They'll protect consumers by eliminating things like sudden interest rate hikes, fees undetectable in fine print, double-billing cycles and billing periods that are so short it's nearly impossible to get your check in on time.

So what's the problem? Banks just so happen to make most of their money off credit card fees. In the past, they've made it easy for you to make late payments and exceed your credit limit. But without their old tricks, they're forced to come up with new ones - like annual fees. Creditors are returning to the early days of credit, when they billed charge card customers a certain amount just for holding their cards. Bank of America is one of the first banks to pilot the program, charging a $29 fee on 1 percent of its customers.

Generally speaking, annual fees are more transparent than many credit card penalties. But that doesn't excuse the fact that banks are charging you to spend your own money. If an extra $30-50 a year doesn't seem like much, remember that most of us are already forking over so much interest that our monthly payments barely cover our principal.

Credit isn't all bad. Used wisely, it can increase your credit score to help you qualify for that car or home loan. It can be a lifesaver in emergencies. And, of course, it's very convenient. But remember - when you pay with credit, you're always going to be at the mercy of big banks. If you're drowning in debt, all those interest payments, fees and rules add up and make it all but impossible to regain financial control. Fortunately, there are ways to loosen creditors' stronghold.

Pay with cash whenever possible. You'll pay just the sticker price, not interest. You'll also be able to better gauge how much you're spending - and will therefore be less likely to go overboard. If you're too stuck in debt to break away from your credit cards, consider one of the most effective ways to lessen your debt load - bankruptcy. When you complete a free personal debt analysis with one of our Chicago bankruptcy lawyers, you'll better understand the bankruptcy process - and whether it could be your ticket to debt freedom.

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