George Kamel - Biden Declares War on Late Fees (Will He Win?)

Episode Date: April 8, 2024

💵 Sign up for EveryDollar today. Create a free budget!  The Biden administration has announced a new rule that will limit credit card late fees. But is that really a good thing? In today’s video, find out what’s likely to happen next and what it means for you.  Next Steps  📗 Order George Kamel’s new book, Breaking Free From Broke.  📺 Watch: Best Way to Pay Off Debt Fast (That Actually Works) Offers From Today's Sponsors  This episode is sponsored by DeleteMe. 🔒 Remove your personal information from the web at https://www.JoinDeleteMe.com/George and use code GEORGE for 20% off.  🙌    🎙️ The Ramsey Show    🍸 Smart Money Happy Hour  💡 The Rachel Cruze Show  💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  💼 The Ken Coleman Show  📈 The EntreLeadership Podcast     Ramsey Solutions Privacy Policy  Learn more about your ad choices. Visit megaphone.fm/adchoices

Recently, the Biden administration announced a new rule that will slash credit card late fees from the current average of $32 dollars down to $8. According to the White House, this will save consumers $10 billion a year. And that means for the 45 million people who are charged these late fees annually, they'll save about $220 per year. Sounds great, right? But will this really save Americans $10 billion? And are the credit card companies really okay with just losing all of this money? I'm going to say no. In today's video, I'll break down what's likely to happen next and what's.

what it means for you. And I'll also show you how to never pay a stupid junk fee to a credit card company ever again. But first, smash those like and subscribe buttons and share this with all of your friends who only watched Joe Biden's speeches in hopes that he says, I'm not kidding around, folks. I'm not joking around.

Come on, man, get a life. Okay, for a quick summary of what's happening here, let's cut to the man who's known for brevity, Joe Biden. I came down because I heard there was chocolate chip ice cream. By the way, I have a whole refrigerator full upstairs. Nope, not that clip. Different clip. This one. With the announcement of this new rule, late fees are now going down to $8, $8, instead of the current average of $32 late fee payments.

This action will collectively save families $10 billion in credit card late fees every year. Okay, so here's what he's talking about. The Consumer Financial Protection Bureau announced new regulations that will set a cap of $8 on most credit card late fees. Although larger card issuers will still be able to charge more as long as they can prove. the higher fee is needed to cover their actual collection costs. Sure. That, FYI, was sarcasm. But most credit card companies aren't expected to do that.

This $8 cap on credit card late fees is part of the bigger plan from the Biden administration to crack down on junk fees, those sneaky hidden charges that you might not even find out about until you see it on your bill. Like when you buy a concert ticket and there's a 20% service fee for, you know, the service, I guess. That doesn't make any sense. So the CFPB says this new rule will collectively save families 10 billion in credit card late fees every year. But will it really? Because some financial experts, including me, are a little skeptical.

Check out this quote from Matt Schultz, chief credit analyst at LendingTree. The reality is that capping late fees will also increase the likelihood that banks raise other types of fees to make up for that lost revenue. Now, to be clear, LendingTree is a scummy company that sells debt products. But this is the one thing Matt and I can agree on. They're going to screw you over either way. The CFPB only limited late fees, which is just one of the tools that credit card companies use to take money from their customers. But they still have a whole Binford tool belt full of fees that they can charge you. Annual fees, balance transfer fees, cash advance fees, expedited payment fees, foreign transaction fees, fee fees, fee fees.

Okay, that last one wasn't real. But it wouldn't shock me if they started charging a fee for the hassle of charging a fee. Wouldn't put it past them. I'm not getting around here, folks. Come on, man. Bottom line, there are plenty of ways they could make up for this lost revenue. at your expense. And don't forget, they can always just raise interest rates, which would affect everyone who carries a balance, not just those who are paying late fees. And they could always

decide to squeeze some extra money out of business owners, meaning they could raise the interchange fees, which are the transaction fees that they charge a business anytime you swipe a card. And guess what? Businesses are, you know, a business. So they're probably just going to raise prices and pass that cost along to you. So now you've got to pay even more for your already overpriced spicy beef nato from 7-Eleven. And by the way, a lot of people wrongly assume that that their precious credit card rewards are paid for by these interchange fees. I mean, surely that 2% cash back on restaurants and that free flight to Boise aren't being paid for by low-income people struggling with credit card debt

and paying exorbitant amounts of interest, right? Right? It's amazing. You are 100% wrong. Well, to find out, let's take a peek behind the curtain at Capital One's 2022 earnings report. Total net revenue from credit card products was over $22 billion. Let's break it down. Net interest income from credit cards was over $16 billion. Net non-interest income from those interchange fees was $4.6 billion.

This means that only 20% of their revenue came from interchange fees charged to businesses, while almost 75% came from interest fees, aka people who couldn't pay off their balance in full every month. So it turns out credit card companies like Capital One are making most of their money from people who are likely struggling to pay the bills, based on the fact that they're carrying a balance on their credit card. Then they turn around and offer a tiny portion of their profits back to you so you can feel like you're beating the system with a $10 spending credit for dining out in the month of June. But this is actually less about which of Capital One's deep pockets the rewards money is coming from and more about the whole reward system itself.

Recently, the Federal Reserve conducted a study to determine who pays for credit card rewards and what they found wasn't pretty. Here's a direct quote. We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer, to richer and high to low minority areas, widening existing disparities. Big yikes. Basically, credit card rewards programs are like Robin Hood in reverse, moving money from lower income credit card users to more wealthy card holders. That's gross. And if you're still not convinced that the credit card industry is shadier than a 90s tarot card commercial, just check this out. The CFPB hasn't just been making new rules. It's also been taking

action against the legal conduct by these companies, including ordering Bank of America to pay a $30 million fine and repay tens of millions of dollars to consumers for illegal conduct, including withholding credit card reward bonuses the company explicitly promised and opening unauthorized accounts. Sketchy. They also ordered Citizens Bank to pay a $9 million fine for failing to give refunds to consumers who reported fraud or billing errors. Then they ordered Citibank to pay $25.9 million for intentional illegal discrimination against credit card applicants the bank identified as Armenian-American. Do those sound like that? the companies you want to do business with?

No! No! And I gotta say, it feels good to see them paying a fine for once instead of the consumer. And by the way, you know what other shady people I don't want to deal with? Data brokers who sell my personal info for profit. It's awful. And that's why I use Delete Me, which happens to be a sponsor of today's video. Delete Me fines and removes data about you from hundreds of data broker websites, and they send you an easy-to-read report outlining what they did. I got my report, and they've already saved me about 13 hours that it would have taken me,

to find the data and remove it on my own. With my code slash link, you can get a one-year plan for less than $9 a month to help keep your personal info off the web. Just go to join deleteme.com slash george today for that 20% off, or just click the link in the description.

That is some peace of mind worth paying for. All right, so back to the $8 cap on late fees. Look, I hate junk fees just as much as the next guy, but I don't think this is going to do that much to help the average American. And while I honestly commend Biden's passion for consumer advocacy, This is a drop in the bucket compared to the real financial problems that we face.

And truthfully, I don't think you should look to any politician on either side of the aisle to be able to help you get ahead financially. And thankfully, that's something you have more control over than Washington does. So here's the deal. If you know that credit cards have trash fees and you know how they make their money, why not just get rid of them? Stop playing the game. I know a lot of you think you can't live without a credit card,

but I am living proof that you can live a great life without that plastic crutch. Think about it. Not too long ago, credit cards didn't even exist. And you know what? We were doing fine. And now we're so dependent on credit cards, people think they need one just to function in society and be an adult. And you know who loves that? The big banks and credit card companies, because they're making a killing off of us.

They've got big buildings downtown. They're sponsoring stadiums. And here we are, broke as a joke. So the solution is simple. The best way to stop credit card companies from charging you sneaky, outrageous junk fees and taking your hard-earned money is to avoid them all together. In fact, if you pay off your cards, cut them up, and cancel your accounts, you will never have to worry about paying fees to a credit card company ever again. And I don't know about you, but I'd rather not give any more of my money to someone who robs the poor to feed the rich.

Even if there's spokesman of Samuel L. Jackson or Jennifer Garner. Make me sick. Now, paying off your card is easier said than done. But even if you have a ton of credit card debt or any other kind of consumer debt, for that matter, there's a specific way to pay it off that's work for millions of people, including me. So check out this video to find out the best way to pay off debt. Thanks for watching. We'll see you next time.