What Help Does The New Credit Card Law Offers
by articleadmin on 03/03/10 at 2:22 pm
Protecting consumers was the main focus on creating and implementing the new credit card law. But plenty of professionals and consumer advocates are still asking for much more protective regulations and say that the new law is lacking or might even set off more difficulties to people who are already credit card holders or seeking to get credit cards.
At present, ”risky” borrowers gets the most burden due to the high interest rates and fees being slapped on them. Some of the reasons lenders give is that customers belonging to the “risk” range are the ones who have a higher likelihood to be at risk of loan default and raising fees and interest rates are their way to get the most out of their customer. The new law will present restrictions that will somehow reduce this sort of practice but there are also some revived regulations that can turn out to be advantageous for lenders as well.
One of the new yet not so new regulations are the annual fees which was removed a decade ago. Although annual fees have already been included to a considerable number of statements, this is now something that all credit card consumers will have to deal with from now on.
Ways to create added revenue were also created by some credit companies. 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, also didn’t escape lenders eyes. From 3 percent to 5 percent, one particular financial institution, JPMorgan Chase, will now charge 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 would have to pay for it since doing the balance themselves would mean that they have to close the existing one which the new provider will not accept.
Acquiring 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 obviously raise the variable interest rates both on savings and credit cards.
The ability to get and keep credit cards is also harder nowadays. Banks these days are more cautious in issuing credit cards and are doing all sorts of measure to reduce risks. Because of the credit crunch, not only did banks tighten the way they grant credit, but they also devised a lot of schemes to drive their credit card revenues up.
Millions of people have also experienced cuts on their credit limits. An estimated $1 trillion amount of available credit is said to have been eliminated by doing this. The most cuts on credit limits that occurred in California and Florida 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.
The new law has provided a few restrictions too and getting around these restrictions will be part of many lenders’ strategies. 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.
