No Late Fees, But Watch Out For Late Rates; New Credit Card Offers Remove Common Penalty
Designed to blunt criticism of ever-higher fees, the new cards - - with names like "Simplicity" and "Clear" -- still can ding late payers. After extolling its new features, Citibank's Simplicity card offer warns that late payments could trigger an increase in the interest rate charged on balances as well as a negative credit report. Such reports often cause other lenders to boost interest rates on a consumer's other outstanding debts.</br></br>American Express Co.'s Clear card will increase a user's interest rate to 28.74 percent if a consumer pays late twice a year.</br></br>David Robertson, president of the Nilson Report, a newsletter that monitors the credit card industry, said he thinks the new cards could be attractive to consumers fed up with punitive fees. However, he warns, the $39 late fees that are currently assessed may add up to far less than the hundreds of dollars in extra interest consumers would have to pay over time if the interest rates on their outstanding balances increase. "It's yet to be proven that consumers read the fine print," he said.</br></br>Pennsylvania attorney Michael J. Bresnahan did read the details when he received his Citibank solicitation last week, and his reaction wasn't positive. "What a deal, no late fee and the interest on the balance goes to somewhere in the 29 percent range," Bresnahan wrote in an e-mail. "Appalling."</br></br>Bresnahan said he has no choice in accepting the card; Citibank said it was sending it to him, whether he wants it or not, to replace an existing card. But, he said, "I'm certainly not going to pay late; that's an invitation to disaster."