Will The New Credit Card Law Be Helpful Or Be A Burden?

07 Mar 2010 @ 2:20 PM

Will The New Credit Card Law Be Helpful Or Be A Burden?

The unfair credit card rate hikes was just one of the issues why the new credit card law was created and implemented. Consumer advocates, however, are still seeking for more consumer protection law and say that the new law is lacking or will set off 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. The reason given by lenders is that risky customers are the ones who are likely to be incapable to pay their obligations and raising fees and interest rates 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 which banks can “modify” to their advantage.

One of the resurrected regulations are the annual fees which was removed a decade ago. Although annual fees have already been included to a considerable number of statements, 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 for those who have refrained from 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 consumer.

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 wants to lower their rates by transferring their current balance from another bank or financial institution. 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.

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 be a concrete legitimate basis for lenders to raise variable interest rates as well.

The ability to get and keep credit cards is also harder nowadays. Nowadays, lenders granting credit cards has become more stricter and are doing all sorts of measure to reduce risks. Since the credit crunch, 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.

Millions of people have also experienced cuts on their credit limits. 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.

Credit card offers on mails have also become picky. 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 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. People who have good credit records and have other affair with banks are the more targeted market for granting credit cards.

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