The Ups And Downs Of The New Credit Card Reform
The unfair credit card rate hikes was just one of the factors why the new credit card law was formed and implemented. Consumer advocates, however, are still seeking for more consumer protection law and say that the new law is ether not enough or will cause more difficulties to people who are already credit card holders or seeking to get credit cards.
Currently, credit card customers who suffer the most are those considered “risky” because of the high interest rates and fees being slapped on them. A few of the reasons lenders give is that customers who are deemed risky are the ones who have a higher chance to default on their loans at an earlier stage and raising their interest rates and fees are their only “security” to get repaid. This kind of unfair practice by lenders could see some limit with the new law but there are also some new, yet not so new regulations that could be taken advantage.
Annual fee that was taken out from credit card fees a decade ago have been resurrected. Even though annual fees have already been included to a significant quantity of statements, all credit card holders will now have to deal with annual fees.
Some issuers of credit cards have also cooked-up other means to rake in additional revenues. One of which is known as inactivity fee which can amount up to $20 for those who have refrained from using their credit card for half a year. Another one is known as processing fee where $1 gets charged to new customers who apply for credit cards and it’s for the processing of paper statement.
Balance transfer fee, which has been around for a long time, were also raised. 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 have no choice but to pay since doing the balance themselves would mean that they have to close the existing one which the new provider will not accept.
The interest rate last year was just 10.7 percent but the new interest rate was increased to 13.6 percent. Base rates is also expected to be increased soon and this would obviously raise the variable interest rates both on savings and credit cards.
Lots of credit card holders may also experience a harder time in keeping credit cards and getting new credit cards will also be the same. Nowadays, lenders granting credit cards has become more stricter and are doing all sorts of measure to reduce risks. Due to the credit crunch, not only did banks tighten the way they grant credit, but they also devised lots of schemes to get revenues as much as they can.
Credit limits were also cut for millions of people. An estimated $1 trillion amount of available credit is said to have been eliminated by doing this. California and Florida are two states that were the most subjected to credit limit cuts 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.
The new law has provided a few restrictions too and a large amount banks will surely discover some 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. Credit card offerings will be more likely targeted to people who have a good credit score or have other banking activities such as savings accounts.
