Side Effects Of The Credit CARD Act Makes Things Difficult For Consumers
The bulk of the Credit CARD Act has finally gone live, though, credit card companies being what they are, that does not mean things are going to get easier for credit card holders here on out. In fact, the new credit card legislation seems to be introducing quite a lot of headaches for consumers with its consumer protection regulations.
One of the biggest issues that the new credit card legislation is addressing is the problem of arbitrary interest rate hikes. In the past, credit card companies had the power to introduce rate hikes whenever they want to. With the new law, they are prohibited from raising the interest rates of new credit card accounts for 12 months. To get around that, credit card companies simply hiked their APRs before the date of activation of the Credit CARD Act. Thus, at the moment, the average advertised annual percentage rate of credit cards is at 13.46%. Consider that, just six months ago, that figure was at 12.11% and, one year ago, the rate was at 11.51%.
To make up for the inevitable losses that the new credit card regulations will cause, credit card companies have also turned to fees. Thus, consumers are now facing more fees at higher levels among virtually all credit card products. Annual fees, on the wane during the past few years, have made a come back and are ubiquitous nowadays. Balance transfer fees have increased considerably, some by as high as 2% from the previous rates. Credit card companies have even introduced inactivity fees – fees that are charged to credit card holders if they don’t use their credit cards or if they don’t reach a certain usage quote for a certain period of time.
Consumers hunting for credit cards may also notice that fixed rate credit cards are on the wane. A large number of those with existing credit card accounts that used to have fixed interest rates have also been moved to variable rate credit cards. That is largely due to the new regulation which restricts APR increases only for fixed rate credit cards, not for variable rate ones. Thus, most credit card holders are now carrying interest rates tied to the prime rate. At the moment, this has little impact as the government is keeping a tight reign on the prime rate. Once it lets it go however – which it plans to do soon – that rate is going to go up and the rates of variable rate credit cards will also go up with it.
