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Welcome To The Credit Card ‘Club’

If I were to join a nice club, or maybe a gym, I would expect to pay a membership fee. I willingly pay dues to professional organizations, too, like the Estate Planning Council of New York City, Inc.

But I was puzzled when a $19 “member fee” showed up recently on my Capital One credit card. So I called the customer service line and asked: What did I join?

Nothing, it turns out. The pleasant-sounding woman who took my call patiently explained that I had not accidentally enlisted in a book of the month club, nor signed myself up for regular spa treatments. That $19 member fee was just for the privilege of carrying a Capital One card.

I protested that my wife and I have had this card for years without ever paying a fee. I would never knowingly accept a card with a fee. My wife and I are not risky customers. Moreover, we pay our plastic bills in full every month. That keeps the card companies from charging usurious interest rates, but they still make plenty from their share of the 3% to 5% that merchants typically pay on each credit card sale.

I knew my protests would be futile. Consumers and card issuers are living in a new world these days. Legislation enacted this year took most of the fun out of the credit card biz, so card companies must get their kicks where they can.

Issuers used to be able to jack up interest rates on outstanding balances for customers who were late on a payment to some other company. No more. They could force you to pay off your zero-interest teaser loan before you could apply a single dollar against a balance with a gazillion-percent APR. Not happening now. And, oh, those great games a lender could play to generate delicious late fees, like changing a card’s due date every month, or having a payment deadline fall in the middle of a business day. Sadly, those shenanigans are history, too.

Not that I ever saw such things. First-rate borrowers used to get first-class treatment. Banks would even waive a legitimate late fee once in awhile if I happened to be traveling when the bill came in. Abusive credit card practices were, for the most part, reserved for the least creditworthy customers. In a strange twist of logic, lenders concluded that the only profitable way to lend to poorer people was to suck on them until all the cash was gone.

The problem with building a business on taking money from the poor is that, eventually, they do run out of money to give you. When that happened, Capital One went begging to the Treasury and got about $3.5 billion to get itself back on track.

So Capital One apparently has a new business model: Soak the rich, rather than squeeze the subprimes. Welcome to the club, member.

I have made a note on my calendar to cancel that Capital One card before next year’s annual membership fee comes due. I reckon I can still find a card company or two that wants to do business the old-fashioned way.

As they say at Capital One: What’s in your wallet?

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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