Smarts Beat Regulation For Keeping Credit Card Debt At Bay

Recently, some legislations included in the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) were activated by regulators. These legislations required credit card companies to give credit card holders longer notice periods before increasing interest rates in their credit card agreements, allow credit card holders to opt out of any changes and mail out credit card bills 21 days before payment is due, 7 days longer than the previous requirements.

Credit card holders, already burdened with large interest hikes, fee increases, introduction of new fees, cutting off of available credit and whatnot, are hardly thrilled by these changes. At most, these new legislations will help in getting information to credit card holders about their credit cards in a timely manner. It won’t address critical issues such as the cutting down of credit or the increasing interest rates. What is even more troubling is that credit card companies are already circumventing some of these legislations. For instance, a lot of credit card companies have switched their fixed rate credit cards to variable rates because informing credit card holders about interest rate changes is only applicable to fixed rate credit cards, according to the legislation.

Even before the Credit CARD Act goes fully live, credit card companies are already busy changing the way they do business to circumvent the legislations contained in the Act. Thus, many are now questioning whether the Credit CARD Act can truly live up to the hype.

However, according to some industry watchers, a better idea at fighting off credit card debt than the Credit CARD Act would be credit card smarts. Although the legislation may provide some protection to credit card holders once it goes live, there is still no substitute for a credit card holder who plays it smart.

Being credit card smart involves a lot of self-discipline. In many cases, credit card holders who find themselves in debt trouble got there because they did not think their purchases through very well. The general rule in credit card spending is “do not spend more than you can afford”. Unfortunately, because credit card purchases use loans which are to be paid off after the purchase has gone through, this rule is particularly difficult to adhere to for consumers who are not very disciplined in their spending. Thus, many credit card holders charge large purchases without proper deliberation on their credit cards only to find themselves unable to pay off their monthly balance when the credit card bill arrives. They then fall into the trap of revolving debt and they bury themselves even deeper by repeating the cycle in the following months.