What Help Does The New Credit Card Law Offers
The unfair credit card rate hikes was just one of the reasons why the new credit card law was formed and implemented. Consumer advocates, on the other hand, are still asking for more protective measures for consumers and say that the new law is ether not enough or will cause more burden to people who are already credit card holders or seeking to get credit cards.
Currently, ”risky” borrowers gets the most burden because of the high interest rates and fees being slapped on them. Lenders reasons for doing this is that customers belonging to the “risk” range are the ones who are likely to be incapable to pay their obligations and raising fees and interest rates are ways to accumulate revenue from these kinds of customers just in case default come about. The new law will present restrictions that will somehow limit this form of practice but there are also some new, yet not so new regulations which banks can “modify” to their advantage.
Ten years ago, annual fees on credit cards were removed but it’s now making its way back to people’s credit card statements. Even if annual fees have already been included to a considerable quantity of statements, all credit card holders will now have to deal with annual fees.
Other added fees are also created by some credit card issuers. Inactivity fee is one 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 $1 gets charged to new customers who apply for credit cards and it’s for the processing of paper statement.
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 opt to do balance transfers to another provider in an effort to lower their credit card debt. Customers who want to do balance transfers have no choice but to pay since the only way that an effective balance transfer could take effect is coordination between the old and new provider.
The interest rate last year was just 10.7 percent but the new interest rate was increased to 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. 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 economic 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.
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 certainly 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. A good credit rating will be the only full-proof method for someone to be granted a credit card.