Credit Cards » Credit Card News » Credit Companies Doing Their Best To Beat The Credit Card Bill
Date July 29, 2009

Credit Companies Doing Their Best To Beat The Credit Card Bill

It seems that the government may have made an enormous mistake giving credit card companies several months leeway to adapt to the credit card bill. Credit card companies are now doing everything they can to increase profits before they have to deal with the credit card bill. Unfortunately for credit card holders, this means more expensive interest rates and fees and drying up credit.

Credit Companies Doing Their Best To Beat The Credit Card BillThe credit card bill, signed May this year, is set to become active next year, February. Although some of the amendments of the credit card bill will become active early this August, the majority of the amendments, especially the most useful ones, will still be several months away. In the meantime, credit card holders will have to face up to a growing number of credit card billing changes that are stifling credit and raising credit card costs for them.

Recently, Bank of America, Discover and JPMorgan & Chase moved their fixed rate credit cards to a variable interest rate setup. It seems that the credit card companies have found a loophole in the credit card bill which will negate the amendments in the bill stifling their abilities to change credit card interest rates at will. The credit card bill only controls credit cards with fixed interest rates. Nothing is said about variable interest rate credit cards. As a result, credit card companies are moving the majority of their credit cardholders to a variable interest rate card.

The move to a variable interest rate credit card will mean that the interest rate will be tied to a specific benchmark, the prime interest rate. As of the moment, the prime interest rate is near the zero mark, making the move somewhat attractive for credit card holders. However, by tying the interest rate to the prime interest rate, credit card companies are virtually guaranteed that the interest rate will rise in the near future.

Many credit card holders are finding themselves trapped by their credit companies. While many do not approve of the move to a variable rate interest rate, they have no choice in the matter. Credit card companies are firmly behind this move and are not allowing their customers to opt out of it.

As this is happening, credit card companies are also busy raising interest rates and fee charges for credit card holders. It may be time for credit card holders to rethink if maintaining a credit card is still worth it. A move to a debit card is highly recommended for those who cannot live without the convenience of plastic.

Date July 14, 2009

Card Holders Need 20/20 Vision To Survive Credit Crisis

The credit card bill will soon be active in a few months. With the bill in place, credit card holders are finally going to see their credit companies take on a semblance of fairness when dealing with them. Or will they?

Card Holders Need 20/20 Vision To Survive Credit CrisisSet to become active next year, on February, the credit card bill may be coming in too late. The release of the credit card bill may have been met with widespread approval by credit card holders and their supporters but the credit industry positively loathes it, and with good reason. The credit card bill is going to bring a lot of legislations which is going to change the way credit companies run their business. Most of these changes are aimed towards benefiting card holders, an unfamiliar situation for the credit industry which has traditionally seen all out support from government, even when they were passing practically Machiavellian legislations for themselves.

The credit card bill is going to keep interest rates much more affordable for card holders. A card holder who fails to pay off his or her bills on time may get an interest hike but credit companies are required to monitor him and review his status every six months. If he begins to pay off his bills on time and the circumstance requiring the rate hike is no longer necessary, then the hike is removed. Credit card holders will also get better transparency from their credit companies. The lack of transparency in credit adjustments, agreements and billing language has long been one of the most controversial ways that credit companies collect fees from customers.

For instance, Bank of America recently issued to their customers fine print notices which informed them that their low rate credit cards will be getting a much higher interest rate. Customers can opt out of the deal if they reject the increase. The window of time that customers have to reject the interest rate increase is relatively small too, so if they missed the notice in the fine print when it arrived, they would likely get the higher interest rate before they could opt out.

This is actually a common tactic for credit companies. Another common example is the much-debated minimum monthly payment. The minimum monthly payment is the smallest payment a card holder can pay to his credit company to ensure that he can continue using his credit card without being cut off from credit. The problem with minimum amount payments is that a larger part of the amount goes to paying interest rates and fees rather than paying off the debt. As a result, the credit card holder pays his debts longer and ends up paying more as well.

Date July 13, 2009

Fight For Credit Card Regulations Not Over

The credit card bill signing into law was greeted with widespread support from consumers and consumer advocates. Many believed that the law would finally bring to close the era of predatory lending and other unfair practices from credit companies. However, many soon realized that a fundamental flaw in the bill would cost credit card holders even more: the nine month window before the credit card bill becomes active.

Fight For Credit Card Regulations Not OverWhile the credit card bill was signed last May, full activation of the bill would not begin until February of next year. The nine month reprieve for credit card companies was meant to give them enough time to change their business machineries to adapt to the new credit card legislations. Unfortunately, credit card companies soon made the nine month leeway a nine month open season to profiting as much as they can from credit card holders and establishing harsh and oppressive credit card rates and fees meant to ensure continued profitability for them when the credit card bill becomes active.

Now consumers are finding themselves in even more trouble than they were before the credit card bill became law. Interest rates are increasing almost by the week, the situation with fees are just as bad and credit companies are introducing even more fees added on to existing ones and available credit is being cut down as fast as credit card holders can pay off their debts. An even more ominous move by credit companies is moving their fixed rate credit cards to a variable rate. This will ensure that, even when the credit card bill is in place, the card holder’s interest rate will still fluctuate without any prior notice.

These happenings have alarmed many financial watchers, not the least of which is Senator Christopher Dodd. Chairman of the Senate Banking Committee, the senator was a supporter of the credit card bill when it was in debate at the Senate. Now, with the bill still inactive and credit companies taking advantage of their nine month leeway, he recently issued a request for an increase in government monitoring of the credit industry, writing a letter to the heads of the FDIC, the Office of Thrift supervision, the National Credit Union Administration, the comptroller of the currency and the Fed.

The senator is pushing for government regulators to move on to enforcing some of the laws in the credit card bill, given the current developments in the credit industry. His worry over the situation is quite valid as recent reports have shown that credit card companies are engaging in severely opportunistic and oppressive practices and are relatively unchallenged, being the ones charged with reviewing their own policies.

Date July 11, 2009

Credit Cards Moving To Variable Rate

Last June, a number of credit card holders from major credit card companies JP Morgan Chase & Co. and Bank of America received notifications changing their fixed rate credit cards to variable rate cards. The variable rate will be tied to the prime rate.

Credit Cards Moving To Variable RateDiscover Financial also made a similar move earlier, moving some of their fixed rate credit card holders to variable rate credit cards this March. According to the spokespersons of these credit companies, the move was made primarily for these companies to be able to manage their business costs better given the change in the conditions of the market.

For Bank of America, almost all of their customers holding fixed rate credit cards will be moved to a variable rate plan. There are going to be some exceptions, though. These would be card holders of student accounts, debt-assistance program accounts and a number of recently opened accounts. Bank of America credit card holders will not have the option to opt out of the planned changes of the credit company. They will also most likely see the changes in their bank statements this August.

Chase credit card holders, on the other hand will have the opportunity to opt out of the move from fixed to variable rate credit cards. However, should they opt out of the change, they will have to close down their credit card accounts. According to spokeswoman of Chase, Stephanie Jacobson, the change to variable rates was made by the credit company due to the “changing costs for funding credit-card loans”. Similarly, credit card holders of Discover were also able to opt out of the move from fixed rate to variable rate credit cards and, those who did, had to close down their accounts. Discover’s change was made effective last May 1.

The move to variable rate credit cards may be a pre-emptive move of credit card companies to counter the foreseen effects of the credit card bill. With the credit card bill in place, credit card companies will not be able to change the rates of their credit cards as easily as they can right now. By moving to a variable rate credit card model, credit companies can easily implement rate hikes without having to issue notifications to their customers. Fixed rate credit cards, on the other hand require credit companies to send notices to their customers in advance before they can implement rate changes. Furthermore, when the credit card bill becomes active, credit card companies will have to issue notifications 45 days before they change their credit card rates.