For many people, especially consumers, the passage of the credit card bill probably felt like a huge victory over the credit card companies. For many years, credit card companies have done their utmost to profit from their customers, from offering credit to subprime borrowers in exchange for excessive interest rates and fees to predatory practices such as sudden rate and fee hikes.
The credit card bill was created to answer these problems and level the playing field for consumers. Unfortunately, even though the bill has passed, it won't be active until the first quarter of next year. In the meantime, credit card companies are doing their utmost to cash in before the restrictions begin.
Currently, many of the major credit card industry players are raising their rates, presumably to help them gear up for the implementation of the credit card bill. With the restrictions in place, the biggest profit sources of credit card companies, interest rates and fees, are going to take a hit. It is going to be harder for them to raise interest rates, so they are raising their interest rates now, while the bill is not yet active.
Recently, Chase credit card holders experienced had an unexpected and unpleasant surprise. The credit company raised their minimum monthly payment requirements from 2% to 5%. Many card holders were caught unaware resulting in several thousand consumers now faced with large monthly fees. Chase has also increased their charges for balance transfers, something which Discover has also done as well. Bank of America also changed their transaction fees for cash advances and balance transfers from 3% to 4%. Along with Citibank, Bank of America is also continually cutting their credit limits lower and lower and raising their interest rates, a trend which has been on the rise not only among these companies but also with other companies since the start of the year.
Although many are complaining that these exploitative actions are worsening the financial conditions of the majority of consumers, it is hardly a surprising move by the credit card companies. The primary motivation of these companies have always been profit and, with their profits threatened, they are cashing in now as much as they can.
The biggest sector suffering financially right now are the consumers. Many of them are questioning the move of the government to give several months leeway for credit card companies to adapt to the new laws. Why the long months before activation? With new regulations in place, credit companies will have to update their systems and reorganize their current structure to allow for the changes being introduced by the credit card bill. Although, practically speaking, even if the law had been set to become active a month after it was signed, credit card companies would still have done their best to profit within that time frame and the credit card crunch would have been worse for consumers.