The CARD Act, which became law last year, was designed to protect the average consumer by limiting the fees and interest rates card issuers could charge while improving term disclosure. The final phase of the CARD act goes into effect this August, but credit card issuers are already geared up to get around the provisions and continue charging increasing credit card fees and high interest to consumers.
As Arizona’s premier bankruptcy relief firm, we here at The Pew Law Center, PLLC are dedicated to revealing tricks the credit card companies play so that you can avoid the financial difficulties that lead to bankruptcy.
What are the new rules of the CARD act?
The highlights of the rules that will be in full effect by August 2010 include:
- Required 21 day grace period to pay for purchases
- 45 days notice for major changes to card terms
- No more automatic fees for exceeding the credit limit
- Interest rates can’t be raised until a payment is 60 days late
- No more inactivity fees
- Excessive late fees are not allowed
- Card issuers cannot charge more than one penalty fee at a time
While these rules sound great, and they are, the card companies are already way ahead of congress and consumers when it comes to finding ways to make money. In the rest of this series we will look at ways they are planning to get around the new law and what you can do to protect yourself.
Finding ways to increase your interest rate
Under the CARD act, if you make your payments on time, your rate on existing purchases is safe. But for new purchases, the card issuer can still legally raise your interest rate in several different ways:
- For fixed rate cards, the issuer can raise your rate to as high as 29.99% as long as they give you 45 days notice.
- Fixed rate cards can also be converted to a variable rate, as long as they give you the required 45 days notice.
- For variable rate cards, as usual your interest rate will still go up if the benchmark rate goes up, AND the card issuer can raise the interest rate that they add to the benchmark as long as they give you that standard 45 days notice.
So keep your eye out for those 45 day notice letters from your card issuer, and be ready to close the account or negotiate a lower rate if they try to raise it.
Cutting your credit limit or closing your account
Banks may not be able to hike your interest rate without warning or charge outrageous fees anymore. But if they suspect you’ve become a bad credit risk, there’s nothing to stop them from cutting your credit limit or closing your account altogether. And they don’t have to give you any warning.
That can be devastating to folks who only have one credit card and need it for a flexible line of credit. It can also look very bad on your credit report.
With banks aggressively reviewing consumer accounts, the best thing you can do is use your credit responsibly; charge something on each of your cards on a regular basis and pay off the balance in full each month. And be sure not to flirt with your credit limit, because once you do start paying your balance down, the card issuer might cut your credit line back along with it so you don’t get stretched too thin again.
While the CARD act has made inactivity fees illegal and capped late fees at $25, there is still no law against them adding or raising other types of fees. Many cards have added or increased annual fees, with some charging as much as $99 a year to hold a credit card.
Other fees likely to get hiked are balance transfer fees, cash advance fees, and foreign exchange fees. And there’s plenty of room for your card issuer to invent a new fee to charge you.
So when you get a letter from your card issuer, don’t assume it’s junk mail. Make sure you read everything they send you and be ready to respond when they up or add to your fees.
If you’re having serious financial issues, we are here to help you. Our top rated Arizona bankruptcy lawyers have assisted thousands by helping them move on from dedicating debt and reclaim their lives. If you’re ready to take that next step, call us today. We provide free consultations to help you get the answers you’re looking for.