The New Credit Card Law

The new credit card law was supposed to safeguard consumers from unfair credit card rate hikes and fees. Although advocates for consumer rights are still seeking for much more protective rules and say that the new law is insufficient or might even bring about more difficulties to people who seek to get credit cards or people who already are credit card holders.

Currently, credit card customers who suffer the most are those considered “risky” because of the high interest rates and fees being slapped on them. Certain of the reasons lenders give is that customers who are deemed risky are the ones who are prone to default on their loans at an earlier stage and raising fees and interest rates are their only “security” to get repaid. Some restrictions against this type of practice are also incorporated in the new law but there are also some resurrected regulations that can become advantageous for lenders also.

One of the resurrected regulations are the annual fees which was removed a decade ago. Although annual fees have already been included to a significant number of statements, all credit card holders will now have to deal with annual fees.

Some issuers of credit cards have also cooked-up other means to rake in additional revenues. 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 half a year. Another one is known as processing fee where for every paper statement processed, 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, 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 doing the balance themselves would mean that they have to close the existing one which will not be acceptable for the new provider.

Obtaining 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 allow lenders to raise variable interest rates.

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

Millions of people have also experienced cuts on their credit limits. An estimated trillion amount of available credit 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 high unemployment rate and housing crisis.

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 getting around these restrictions will be the strategy for lots of lenders. 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 people who have a good credit score or have other banking activities such as savings accounts.