The new credit card law was said to guard consumers from unfair credit card rate hikes and fees. Though advocates for consumer rights are still seeking for more consumer protection law and say that the new law is lacking or will set off more burden to people who seek to obtain credit cards or people [...]
The new credit card law was said to guard consumers from unfair credit card rate hikes and fees. Though advocates for consumer rights are still seeking for more consumer protection law and say that the new law is lacking or will set off more burden to people who seek to obtain credit cards or people who already are credit card holders.
Currently, borrowers who are believed as “risky” suffer the most 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 have a higher likelihood to be at risk of loan default and raising fees and interest rates are their method to get the most out of their customer. A number of restrictions against this type of practice are also incorporated in the new law but there are also some new, yet not so new regulations that could be taken advantage.
One of the new yet not so new regulations are the annual fees which was removed a decade ago. Although a significant 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.
Further added fees are also created by some credit card issuers. Inactivity fee is one which can amount up to $20 for those who have refrained from 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 balance transfers can only be done by their current credit card provider.
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 obviously raise the variable interest rates both on savings and credit cards.
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 lots 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 due to the mortgage crisis and high unemployment rate.
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 good number banks will surely 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. People who have good credit records and have other transaction with banks are the more targeted market for granting credit cards.
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