The Credit Card Accountability Responsibility and Disclosure (CARD) Act established many provisions to protect consumers from high interest rates and fees from credit card companies. New regulations are being finalized in August to make sure efforts to reconstruct the financial services industry framework will continue. Credit card companies are feeling the pressure to keep up with these changes and are starting to shift some of the burden onto customers.
Payment and Fee Changes
The requirement for companies working in the financial industry to offer full disclosure is making it more difficult for credit companies to penalize customers and causing them to lose money.
Some of the changes include:
- Bills must be delivered to customers 21 days before payment is due
- Payments must be due on the same date each month.
- Credit card companies must apply any payments above the minimum payment to the balance with the highest interest rate.
- Up-front fees such as application fees and annual fees are limited to no more than 25% of the initial credit limit.
- The newest change will take place in mid-August when card companies will not be allowed to charge a late fee greater than the minimum payment on the account, or at most $25 to $35. You can also look forward to an elimination of inactivity fees.
Card Companies look for New Ways to Sucker Consumers
With so many fees being diminished and eliminated credit card companies are coming up with new ones so they can still make money off of consumers. The Wall Street Journal reported that in just one year banks are expected to lose nearly $390 million in fee revenue. Here are 3 ways banks are trying to figure out a way around these fees.
1. Advertising Professional Cards
Many banks have increased their marketing efforts to get businesses to sign up for these credit cards because corporate cards are not covered under the new consumer regulations. The people who should watch out for this are business owners and other such professionals thinking about signing up for a new card.
2. Increasing Fees
Yes, banks are required to limit many fees and even get rid of some. But the ones that weren’t specified under the new reform are fair game for changes or hikes. Many banks are raising their annual fees on credit cards as well as their balance transfer fees.
3. Beware of ‘Rebate Cards’
Some banks offer rebate cards which can refund up to 70% of your finance charges provided you are on time with your payment. This sounds like a tempting offer, but rebates aren’t covered by the CARD Act, meaning the bank can revoke the card and hit consumers with high charges.
The government is doing everything it can to get American consumers back on track with their spending while banks are doing everything in their power to avoid losing money. As a consumer make sure you read up on the CARD Act and research which changes apply to you. If you see an unexpected rate increase or an unanticipated charge look into whether or not it is legal. Before you sign up for a new card or rewards program read the fine print and make sure it is covered by the CARD Act.