Credit Card Companies Silently Squeezing Through Credit Card Bill Loophole

Credit card companies are busily making changes in the way they run their business to prepare for February of next year, when the new credit card bill gets activated. The credit card bill was drafted by lawmakers to force credit companies to play fair with their customers. In years past, abusive and predatory practices was the norm among credit company practices.

With the credit card bill in place, legislators and credit card holders hoped to see some positive changes in the way credit companies ran their business. If recent events are any indication, that’s not going to happen anytime soon. Credit card companies are busily raising interest rates and adding new fees while cutting of credit for credit card holders. A lot of these changes that credit card companies are doing are mostly in preparation for the coming changes of the credit card bill. Unfortunately for credit card holders, most of the changes that the credit card bill will enforce will not become active until February of next year, which is why credit card companies are still able to do what they are doing right now.

There are some provisions in the bill which will become active this August, however. One particular provision will force credit companies to issue a 45 day notice to their customers if they are going to raise interest rates. Unfortunately, credit card companies are weaseling out of the provision because of a loophole: the provision is only applicable to credit cards with fixed rates.

Major credit card companies of the US are now busy moving their customers from the traditional fixed rate credit cards to variable rate credit cards. The interest rate of variable rate credit cards are usually dependent on the prime rate plus a percentage point margin that the credit company adds on. The current prime rate is at 3.25%. The percentage point margin will depend mostly on the credit company.

A variable rate credit card can change interest rates without any prior notice, as the rate is tied to the prime rate. Thus, it stands to reason that, while the rate can go incredibly high, it might also drop incredibly low as well. This might have been good news for credit card holders if not for the fact that most credit card companies establish a certain “floor”. The credit card rate cannot drop lower than the “floor” value.

What this means for credit card holders is a need for constant vigilance on their credit card usage. It is becoming more important than ever that credit card holders do their best to be aware of their interest rate fluctuations. The best thing to do would, of course be to keep credit card spending low and to pay off any balances every month without fail.