Contact: The media may contact Ken McEldowney or Linda Sherry about this story at 415-777-9648.

In its new annual Credit Card Survey, released today, Consumer Action (CA) examined 140 cards from 45 issuers and found that many banks are immediately charging late fees on payments not received on the due date and high punitive interest rates after just one or two late payments or a change in credit performance with other creditors.

"It’s outrageous that credit card late fees have reached $39," said Ken McEldowney, CA executive director. "With average monthly minimum payments at 2% of the balance, the late fee as a percentage of that payment can easily be more than 100%. When we looked at the effect of late payments on cardholders with a $2,000 balance, we found that customers of the top 10 card issuers pay late fees that are on average 129% of the minimum payment."

With Bank One, Chase, Discover and Fleet cards, the late fee as a percentage of the minimum payment with a $2,000 balance was 145%. "That’s harsh punishment for missing the due date by one day," said McEldowney.

CA charged that anti-consumer policies employed by credit card companies help cardholders to slide deeper into debt. In the example below, which assumes a $400 balance, a $500 credit limit and a 14% interest rate, fees alone cause the balance to jump more than 20% in one month, from $392 to $482.70.

May Monthly Statement

Balance including interest charges: $400
Minimum Payment: $8
Payment received one day late: ($8)
Penalty Interest Rate Applied: 29.99%

June Monthly Statement

Balance: $599.72
Previous month’s balance: $392
New purchases: $117.00
Interest charges: $12.72
Late fee (May): $39
Over-limit fee: $39
New balance: $599.72
Balance excluding new purchases: $482.70

The new survey, conducted between Feb. 16 and March 31, found that:

• 26 (58%) of surveyed banks now have a cut-off time for late payments, even on the due date itself.
• 48% of surveyed issuers are using tiered late payments tied to the cardholder's balance or the number of annual late payments. Last year 20% of issuers had adopted this strategy.
• Late fees are as high as $39 at Bank of America, MBNA and Providian.
• 44% of the banks surveyed use "universal default" policies to increase interest rates based on their customers' poor payment records with other creditors.
• 85% of the banks punish cardholders who pay late with higher "penalty" rates. CA found penalty rates as high as 29.99% (Providian), with an average penalty rate of 22.91% -- an increase of 1.38 percentage points since last year.
• 31% of the banks said a penalty rate could be triggered by just one late payment, while 35.5% said that it would take two late payments in consecutive months or in a six-month period to cause a rate increase.
• 73% of surveyed cards have a higher APR for cash advances taken with the card, with an average cash advance rate of 19.5%.
• 43 banks (95.5%) have over limit fees ranging from $10 to $39 each month that the account balance remains higher than allowed. The average over limit fee this year is $29.13 as compared to $28 a year ago.
• 51% of the surveyed institutions will not provide a firm annual percentage rate (APR) until they have screened the applicant's credit history. Only 39% of surveyed issuers had this policy last year.
• 78% of the cards had lower introductory ("teaser") rates, with "zero per cent" teasers on 53 cards.
• 26 of surveyed banks are adding their own foreign currency conversion charges that are separate from MasterCard and Visa fees. The number has grown since last year's survey, which found 17 issuers with currency conversion fees.

Consumer Action, founded in 1971, is a national nonprofit consumer education and advocacy organization. For more information about what Consumer Action does, click here.