The nation’s biggest credit card issuer JPMorgan Chase & Co. is raising some of its credit cards’ balance-transfer fees to 5 percent. The fee is the highest among the largest U.S. banks. The company cited tighter regulations and costs for the hike.
Customers received communication from the New York-based lender, informing them of the new changes that will take place in August.
JPMorgan spokesman Paul Hartwick said that the current economic situation is affecting costs and doing business has been gravely impacted by increasing losses. He added that the company is increasing fees to cover for the cost of the transactions. Hartwick failed, however, to provide the current average fee for balance transfers.
Industry executives have warned that the new legislation signed into law by President Obama on May 22 will have tremendous impact on the credit card industry and consumers alike. The Credit Card Accountability Responsibility and Disclosure Act of 2009 will require issuers to allow payments to balances with higher interest first, effectively prohibiting “universal default”.
House Financial Services Committee chairman Barney Frank said that Obama’s proposed Consumer Financial Protection Agency would be responsible for monitoring any increases credit card companies may be planning.
JPMorgan CEO Jamie Dimon said that the bank’s card business was the most challenged and that the new regulations can cost the bank $500 million. It has around 159 million cards currently in circulation and more than $176 billion of managed loans.
According to David Robertson, the publisher of Nilson Report in California, JPMorgan is attempting to determine whether 5 percent is the potential barrier for consumers.