DEFINITION of 'Fee Harvesting Card'

Credit cards targeted at consumers with poor credit scores that carry numerous fees, making the cost of credit extraordinarily expensive.  Fee harvesting cards charge fees for setup and activation, in addition to a monthly or annual fee, that serve to dramatically reduce the amount of credit extended to the consumer. Most fee harvesting cards extend a very limited credit line to begin with, so the total fees in relation to the credit available become exorbitant. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 addressed the issue of fee harvesting cards by requiring that an issuer not require consumers to pay fees (excluding penalty fees) exceeding 25% of the total initial credit line during the first year in which an account is opened.

BREAKING DOWN 'Fee Harvesting Card'

In April 2011, the CARD Act revised the regulation regarding fee harvesting cards, to include the 25% fee limitation to fees charged before account opening. This was in response to the practice adopted by some card issuers, who were requiring consumers to pay hefty application and processing fees even before opening a credit card account. When combined with other fees subsequently charged to the account, the total fees exceeded 25% of the initial credit line.

Fee harvesting cards gained notoriety during the boom years for subprime credit leading up to 2008, after the Federal Trade Commission (FTC) brought a high-profile enforcement action against an issuer of these cards. In a federal court complaint filed in June 2008, the FTC alleged that the issuer engaged in deceptive conduct when marketing its credit cards. Two of the issuer’s most usurious types of cards were:

  • Fee-based credit card with $300 limit – targeted at consumers with subprime credit ratings, these cards had a purported $300 credit limit. However the issuer immediately charged consumers fees of as much as $185, leaving only $115 in available credit.
  • Credit cards with up to $3,250 limit – the issuer marketed this card to consumers with slightly higher credit scores but failed to disclose that half of the available credit would be withheld for the first 90 days.
RELATED TERMS
  1. Subprime Credit Card

    A type of credit card issued to people with substandard credit ...
  2. Zero Balance Card

    A credit card on which a consumer does not owe any money because ...
  3. Credit Card Balance

    The amount of charges, or lack thereof, owed to the credit card ...
  4. Universal Default

    A practice whereby a credit card issuer increases a credit card ...
  5. Opt Out Right

    A consumer’s authority under the 2009 Credit CARD Act to disagree ...
  6. Business Credit Card

    A credit card intended for use by a business rather than for ...
Related Articles
  1. Personal Finance

    Credit Cards For People With Bad Credit

    Yes, you can get a credit card and start repairing your credit history. But brace yourself for low credit limits, sky-high interest and staggering fees.
  2. Personal Finance

    Terrible Credit Score? Try These Credit Cards

    When your credit is less than stellar you have fewer choices. But some are still better than others. Here's our read on which cards to get.
  3. Personal Finance

    Understanding Credit Cards

    Credit cards are a type of unsecured personal loan between the credit card issuer and the credit card holder.
  4. Personal Finance

    Small Business: Minimize Your Credit Card Fees

    Accepting credit cards is a must these days, but small business owners can take steps to minimize profit-eating credit card fees.
  5. Personal Finance

    Best Credit Cards For People With Poor Credit Scores

    There are still ways you can build credit with a credit card, even if you have bad credit.
  6. Personal Finance

    Credit Card or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  7. Personal Finance

    7 Factors For Comparing Credit Cards

    It's good to find a credit card that fits your lifestyle, but read the fine print to make sure you're not overpaying for the benefits.
  8. Small Business

    How to Use Small Business Credit Cards

    A small business credit card can be a convenient way to increase your company's purchasing power, but must be carefully managed.
  9. Personal Finance

    How Many Credit Cards Should You Have?

    National stats indicate most consumers have three or more cards - are you one of them?
RELATED FAQS
  1. How can I avoid paying unnecessary credit card fees?

    Examine different strategies for reducing fees on credit cards. Learn about the Consumer Financial Protection Bureau and ... Read Answer >>
Trading Center