What Help Does The New Credit Card Law Offers
The unfair credit card rate hikes was just one of the factors why the new credit card law was formed and implemented. But lots of experts and consumer advocates are still seeking for much more protective rules and say that the new law is insufficient or might even produce more difficulties to people who seek to acquire credit cards or people who already are credit card holders.
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 who are deemed risky are the ones who have a higher probability to be unable to pay their obligations and raising their interest rates and fees are their way to get the most out of their customer. A number of restrictions against this type of practice are also added in in the new law but there are also some resurrected regulations that can become advantageous for lenders also.
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 though annual fees have already been included to a significant number of statements, this is now something that all credit card consumers will have to deal with from now on.
Other added fees are also created by some credit card issuers. 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 $1 gets charged to new customers who apply for credit cards and it’s for the processing of paper statement.
Other fees that already exist like balance transfer fees have also been 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 the only way that an effective balance transfer could take effect is coordination between the old and new provider.
Last year’s interest rate amounted to 10.7 percent. Now, interest rate for new credit cards is at 13.6 percent. Base rates is also expected to be increased soon and this would allow lenders to raise variable interest rates.
Credit card holders may also have a hard time to obtain and maintain their credit cards. Banks these days are more cautious in issuing credit cards and are doing all sorts of measure to reduce risks. Since the economic slump, not only did banks tighten the way they grant credit, but they also devised lots of schemes to get revenues as much as they can.
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 because of 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 definitely 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.