04 Mar 10 The New Credit Card Law

Protecting consumers was the main focus for creating and implementing the new credit card law.  Consumer advocates, on the other hand, are still seeking for more protective measures for consumers and say that the new law is lacking or might even cause more difficulties to individuals who seek to obtain credit cards or people who are already credit card holders.

Currently, credit card consumers who suffer the most are those considered “risky” due to the high interest rates and fees being slapped on them.  The reason given by lenders is that customers who are deemed risky are the ones who are prone to be at risk of loan default and raising their interest rates and fees are ways to accumulate revenue from these types of customers just in case non-payment take place.  Several restrictions against this type of practice are also contained in the new law but there are also some new, yet not so new regulations that could be taken advantage.

Yearly fee that was taken out from credit card fees a decade ago have been resurrected.  Although some credit companies already included annual fees on their customers’ credit card statements, all credit card holders will now have to deal with annual fees. 

Ways to create added revenue were also created by some credit companies.  Inactivity fee is one which can amount up to $20 usually given to those who had stopped using their credit card for half a year.  Another one is known as processing fee where for every paper statement processed, $1 is charged to the customer.

Existing fees were also raised and one of them is the balance transfer fee.  From 3 percent to 5 percent, one particular financial institution, JPMorgan Chase, will now charge customers who opt to do balance transfers to another provider in an effort to lower their credit card debt.  Customers who want to do balance transfers would have to pay for it since the only way that an effective balance transfer could take effect is coordination between the old and new provider.

Getting new cards will now have a 13.6 percent interest rate compared to last year’s 10.7 percent.  Later this year, base rates will also be increased and this would allow lenders to raise variable interest rates.

Credit card holders may also have a hard time to obtain and maintain their credit cards.  A more cautious approach is being done by lenders when it comes to granting credit cards and are doing all sorts of measure to reduce risks.  Since the economic crisis, not only did banks tighten the way they grant credit, but they also devised a lot of schemes to get revenues as much as they can.

Credit limits were also cut for millions of people.  An estimated available credit amounting to $1 trillion is said to have been eliminated by doing this.  The most cuts on credit limits that occurred in California and Florida because of the high unemployment rate and housing crisis. 

People should also not be surprised if they are not receiving credit card solicitation in their mail anymore.  Compared to year 2000 up to 2008 which had an average of 2.3 billion solicitations, only a quarter of this figure have been recorded in 2009.

A few restrictions have been added to the new credit card law as well and a good number banks will definitely discover several ways to get around it.  This is an additional factor why banks will be more reluctant to issue credit cards especially to those who have low credit ratings and low FICO scores.  A good credit rating will be the only full-proof method for someone to be granted a credit card.

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