A lot of credit card holders are probably excited to see regulators finally paying attention to them with this new Credit Card Act of 2009. What they will not be excited to hear is that this new law has enough flaws in it that they will have to pay extra attention on their card terms to catch unpleasant new changes in their policies.
Card companies are notorious for maximizing their profits, no matter how warm hearted their advertising campaigns may be. It should come as no surprise to anyone that credit card companies have been busy finding and exploiting loopholes in this new law during the long grace period given to them between signing of the law and its activation – another contentious issue among consumers and consumer advocates.
One loophole that almost all credit card companies and firms are taking advantage of is the fixed rate loophole. This new credit law does not allow card companies and firms to raise the interest rates of credit card holders on their existing balances. That regulation, however, only applies to cards with fixed rate interests. Credit cards with variable interest rates are exempt to this rule. This is the main reason why credit card companies have been switching a portion of their clients’ accounts from fixed rate interests to variable rates just as fast as they can.
At the moment, credit card holders may not notice the difference or may actually think that variable rate credit cards are cheaper than compared to having fixed rate ones. Currently, credit cards with variable rates have similar or even lower rates compared to fixed rate credit cards. That is because variable rate credit cards are tied to the prime rate – which justifies the word “variable.”
As of the moment, the prime rate is at a historic low since the government is doing its best to keep interest rates as low as they can. That is not going to last, however. The Federal Reserve will be raising interest rates soon enough. Experts believe that the Federal Reserve will do so in one year, more or less, so as to prevent inflation. Once this prime rate goes up, credit cards with variable interest rates will go up as well which may catch a lot of card holders unawares.
With this new credit card law in place, credit card holders will have to make sure to pay close attention to their card terms as well as policies. Missing the small details in bills, statements or mails could mean large fees later on.