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It's Fee Hike Time Again

My bank has just raised its fees. The stop-payment fee has risen 25%, to $25. The incoming wire transfer fee is up 20%, from $10 to $12. The bounced-check fee is up 10%, from $30 to $33.

Bank of America (NYSE: BAC  ) recently increased the fee it charges non-customers for withdrawing cash from most of its ATMs from $2 per transaction to $3, a 50% increase. It must be rate-hike season.

According to Bill Hardekopf of, "Credit card issuers continue to increase their rates and fees, despite [their practices] being investigated by Congress just four months ago."

For example, Hardekopf reported that Discover Financial Services (NYSE: DFS  ) , which issues Discover cards, has raised its cash-advance rate from 20.99% to 22.99%. JPMorgan Chase (NYSE: JPM  ) , he said, is now charging more than 28% for cash advances. It gets uglier: "On top of the high rate, issuers charge a 3% transaction fee with no limit. The average cash advance amount for a MasterCard is $1,560, so in the first year, you could pay almost $500 for a $1,560 cash advance loan."

It doesn't end there. Lots of rates and fees are rising, and as each bank collects more, another bank will decide to do the same thing -- after all, why leave money that can be taken on the table? Look at universal default -- a practice (under attack, fortunately) in which a card issuer can whack you with a steep interest rate all of a sudden if you're late paying some other bill.

I listed some banks' default rates last year -- American Express (NYSE: AXP  ) was charging 28%, for example, and Capital One (NYSE: COF  ) was charging 27% -- and it seems that some have risen even higher. JPMorgan Chase, for example, seems to have hiked its universal default rate from 30% to 32%. Imagine paying 32% per year on your debt -- that would cost you $1,600 on a $5,000 debt -- just in interest.

When Congress was looking into practices in the credit card industry, it was calling for reforms. Here's hoping Congress doesn't drop this ball. Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said, "I would like to put the credit card industry, issuing banks, and card associations on notice. ... If you currently engage in any business practice that you would be ashamed to discuss before this Committee, I would strongly encourage you to cease and desist that practice."

You can learn much more about the surprisingly interesting credit card industry in our Credit Center.

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