How The New Credit Card Law Make Things Better Or Worse For Consumer
Protecting consumers was the core focus towards creating and implementing the new credit card law. But lots of experts and consumer advocates are still seeking for more protective measures for consumers and say that the new law is lacking or will produce more burden to individuals 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. Lenders reasons for doing this is that customers who are deemed risky are the ones who are likely to default on their loans at an earlier stage and raising their interest rates and fees are their method to get the most out of their customer. The new law will present restrictions that will in some way limit this sort of practice but there are also some revived regulations that could be taken advantage.
Yearly fee that was removed from credit card fees a decade ago have been resurrected. While annual fees have already been included to a significant number of statements, all credit card holders will now have to deal with annual fees.
Other additional fees are also created by some credit card issuers. 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.
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, now charges 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.
Obtaining new cards will now have a 13.6 percent interest rate compared to last year’s 10.7 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. 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. Due to the credit crunch, not only did banks tighten the way they grant credit, but they also devised plenty of schemes to get more revenue from their credit cards.
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. 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 most banks will surely discover various 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. Individuals who have good credit records and have other affair with banks are the more targeted market for granting credit cards.
