Will The New Credit Card Law Be Helpful Or Be A Burden?
Protecting consumers was the key focus for creating and implementing the new credit card law. Consumer advocates, however, are still seeking for much more protective regulations and say that the new law is insufficient or might even bring about more burden to individuals who are already credit card holders or seeking to get credit cards.
At present, credit card customers who suffer the most are those considered “risky” because of the high interest rates and fees being slapped on them. The reason given by lenders is that risky customers are the ones who are prone to be unable to pay their obligations and raising their interest rates and fees are their tactic to get the most out of their customer. This type 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 removed from credit card fees a decade ago have been resurrected. While a considerable percentage of lenders in the US have added annual fees to their borrowers bills even before the new law took effect, this is now something that all credit card consumers will have to deal with from now on.
Ways to create added revenue were also created by some credit companies. One of which is known as inactivity fee which can amount up to $20 usually given to those who had stopped using their credit card for six months. 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.
Other fees that already exist like balance transfer fees have also been raised. From 3 percent to 5 percent, one particular financial institution, JPMorgan Chase, now charges 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 doing the balance themselves would mean that they have to close the existing one which the new provider will not accept.
Last year’s interest rate amounted to 10.7 percent. Now, interest rate for new credit cards is at 13.6 percent. The increase in base rates is also expected to rise later on and this would be a concrete legitimate basis for lenders to raise variable interest rates as well.
Credit card holders may also have a hard time to obtain and maintain their credit cards. Nowadays, lenders granting credit cards has become more stricter and are doing all sorts of measure to reduce risks. Since the economic slump, 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 mortgage crisis and high unemployment rate.
Most credit card providers are now sending credit card solicitations only to those they know are good candidates. 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 getting around these restrictions will be part of many lenders’ strategies. 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 way for someone to be approved a credit card.
