The Ups And Downs Of The New Credit Card Reform

The unfair credit card rate hikes was just one of the issues 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 lacking or will bring about more difficulties to people who are already credit card holders or seeking to get credit cards.

Currently, borrowers who are considered “risky” suffer the most because of the high interest rates and fees being slapped on them.  The basis given by lenders is that risky customers are the ones who are prone to be at risk of loan default and raising their interest rates and fees are their tactic to get the most out of their customer.  Several restrictions against this type of practice are also added in in the new law but there are also some resurrected regulations which banks can “modify” to their advantage.

Yearly fee that was taken out from credit card fees a decade ago have been resurrected.  While 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. 

Some issuers of credit cards have also cooked-up other means to rake in additional revenues.  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 for every paper statement processed, $1 is charged to the customer.

Balance transfer fee, which has been around for a long time, also didn’t escape lenders eyes.  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.

Last year’s interest rate amounted to 10.7 percent.  Now, interest rate for new credit cards is at 13.6 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.

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.  Because of the financial crisis, not only did banks tighten the way they grant credit, but they also devised a lot of schemes to get more revenue from their credit cards.

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.  California and Florida are two states that were the most subjected to credit limit cuts because of 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.

A few restrictions have been added to the new credit card law as well and a large amount banks will certainly 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.  Credit card offerings will be more likely targeted to individuals who have a good credit score or have other banking activities such as savings accounts.

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