Biden Admin BANS High Credit Card Late Fees (new $8 Maximum)

Biden Admin BANS High Credit Card Late Fees (new $8 Maximum)

Excessive credit card late fees have been banned by the CFPB as part of the Biden admins’ war on “junk fees”, here is what I think about it.
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Hey credit Warriors welcome to the show So credit card late fees have now been Capped at $8 due to a new rule from the Consumer Finance Protection Bureau this Is part of the Biden admins war on So-called junk fees which includes Credit card late fees but also things Like family seat assignment fees on Airplanes but in this video we are Specifically looking at credit card late Fees and I want to go through whether This is a good thing or a bad thing so First of all if you're someone who Regularly pays late especially because Of the tough Economic Times we're living In when we've had Skyhigh inflation over The past few years you're going to think Of this as a good thing I mean at least At the start your late fee will be Reduced and you won't feel any other Negative changes to your credit card Account and in case some of you are Thinking how can there be that many People who are regularly paying late Aren't they trashing their credit scores Well you have to pay 30 days late in Order to get that reported as a late Payment on your credit report if you pay Just a few days later or a week late the Only consequence is that late fee from The bank so you would probably be Surprised at the number of people who do Regularly pay late simply because their Payday isn't lining up with the due date

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On their credit card and they are just Eating that $35 fee or whatever every Time you know what they say it's Expensive to be poor there are about 45 Million Americans who pay late fees and It costs them about $220 a year on Average probably on top of the numerous Other junk fees that they pay and these People are definitely on a road to Financial problems I mean if they don't Turn it around they're going to risk Falling into a hole that they can't get Out of so it's definitely a negative Financial behavior and although this $8 Cap will help those people up first it Is debatable whether it is going to save The money in the long run since credit Card companies will probably slightly Raise their interest rates to compensate And many of the people who pay late fees Are probably carrying balances and Paying interest too the card companies Will have to make up about $10 billion In loss Revenue due to these late fees Dropping from around $32 on average to Being capped to $8 now raising interest Rates or raising other types of fees or Cutting rewards like cash back and Points slightly will cancel out some of That saving on late fees but I think the People paying those lower late fees will Still benefit slightly although not as Much as the new rule suggests because Now that 10 million may be spread across

A larger pool of card holders not just People who were originally paying the Late fees so really it's going to be a Redistribution of those late fees and Not a cancellation of them but on the Flip side of that and I want to give Both sides here there are many cards Like the Apple card for example that Don't charge late fees they just make Money in other ways the cfpb says credit Card companies have been raising their Late fees for years without showing the Math of their increased costs and they Call this a loophole in the 2009 card Act that allows for them to adjust their Late fees for inflation the average late Fee was $23 in 2010 and that Rose to $32 By 2022 now they will be set at 8 and if Banks want to charge more they will need To show the math for their increase so It is possible that these late fees were Rising at an unfair rate like the cfpb Says so what do I think well this 10 Billion that they have just lost in late Fees comes out of a total of 130 billion The card companies charge in interest And various types of fees each year so The 10 billion is 7% of that income now Depending how they choose to make that Money back that 7% will be distributed In different ways it could be in higher Interest rates in which case it's still Just going to be the more financially Irresponsible people paying it may be

The same people who are paying the late Fees they may choose to eat part of that Cost like perhaps they increase other Fees to make back 5% and they eat the Other 2% that would be great um one Person who works at a bank also told me That they're now going to charge a fee For a physical paper statement to make Money back that they just lost because Of the cap in late fees in that case It's only going to be the people Ordering paper statements that have to Pay as much as the American banking Association or the GOP side of the Senate Banking Committee mouths off About this saying how terrible it is I Can't see it really being that bad the Thing my viewers are most concerned About is going to be if this rule is Going to affect credit card rewards and I think it's not going to be that bad Since that $10 billion will probably be Redistributed into higher interest rates Paid by many of the same people that Were paying the late fees maybe some Other kind of fees and maybe some small Cuts in rewards but I don't think it's Going to be that noticeable at all I Think the benefit for people paying the Late fees will be noticeable at first But will be shortlived as other fees and Interest that they are paying will rise Over time as the companies adjust but I'd love to hear what you guys think

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