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CNN Sunday Morning

Americans Charged $400 Billion, Paid $50 Billion in Finance Charges

Aired May 19, 2002 - 09:19   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MILES O'BRIEN, CNN ANCHOR: Last year, Americans charged $400 billion on their credits cards and paid about $50 billion in finance charges. That's some real change. CNN's Tim O'Brien shows us what's wrong with that picture.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice over): Alan Greenspan and the Federal Reserve are still holding down long-term interest rates. Low mortgage rates are still encouraging home sales, but credit cards? Bankers say that's another story, and a riskier one.

JAMES CHESSEN, AMERICAN BANKERS ASSOCIATION: Let's look at the reasons why interest rates went down. They went down because the economy was terribly slow. There was millions of people that were laid off as part of this over the past 12, or 18 months, and what that means is there's greater risk in the system.

O'BRIEN: Of 85 banks surveyed by Consumer Action, 25 had minimum interest rates that their customers have to pay regardless of how low the prime rate goes, and should you pay late, you could get clobbered.

FRANK TORRES, CONSUMERS UNION: Consumers are getting hit with shortened grace periods, higher penalty fees, penalty interest rates through the roof, sometimes as high as 30 percent.

O'BRIEN: Thirty percent. Now what do you have to do to get that, just be late?

TORRES: Be late on a payment to the credit card.

O'BRIEN: Banks are imposing late fees more frequently, up seven percent last year, and more and more banks are charging the maximum $35 fee. Of course, you don't pay penalties or interest if you pay the full amount on time.

O'BRIEN (on camera): Beyond that, Consumers Union suggests shopping around for the best rates and avoiding those credit cards that set a floor on how low rates can go. There are some 6,000 credit card issuers in the U.S. and while some respond quickly to cuts in Federal lending rates, some do not respond at all. Tim O'Brien, CNN Financial News, Washington.

(END VIDEOTAPE)

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