In the past several years, millions of consumers may have been hit with penalty interest rates and fees as a result of missing a payment on their credit card accounts, but those concerns could no longer be an issue if a new trend among some lenders catches on.
A number of the nation’s largest credit card lenders — including Discover Financial Services, Citigroup and Barclays — are now getting rid of penalty rates and fees for some accounts as a means of attracting new customers, according to a report from the Wall Street Journal. This type of account may be ideal for borrowers who like to use their credit cards but have a tendency to occasionally miss their payment deadlines.
However, it should be noted that these lenders’ newfound leniency in allowing for greater flexibility and freedom from late payment penalties isn’t a cure-all for missed deadlines, the report said. While delinquent borrowers won’t be hit with these added penalties, the missed payment will still show up on their credit report and can lower their credit score.
Lenders claim they’re making this change because they want to be more attuned to consumers’ needs, the report said. However, credit industry experts say it’s more likely a combination of companies trying to become more compliant with the Credit Card Accountability, Responsibility and Disclosure Act and simultaneously do more to attract new borrowers who might have shunned such accounts after missteps in the past.
“What we learned in talking to customers is that they were looking for a product that eliminates the ‘gotchas,’” Anthony Merola, managing director at Citi Cards, told the newspaper.
However, some lenders have been way ahead of the curve on this trend, the report said. Wells Fargo and USAA Federal Savings Bank, for example, haven’t charged penalty rates on any credit cards since 2010, and US Bank has abandoned the practice as well.
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Payment history makes up 35 percent of a borrower’s total credit rating, and late payments can take a toll on their score. Making sure all payments are sent in on time and in full is key to keeping your credit in good standing.
Image: meddygarnet, via Flickr