New Credit Card Regulation
Yesterday we talked about the new changes that the CARD has brought to the wild wild west of credit card issuers world. Today we will cover even more dramatic changes and how they will affect people from all walks of life. Having said that let’s disect the new regulations and find out who it really benefits and why is AGAIN just another half baked idea.
So credit card companies are no longer allowed to sit on college campuses and sign students up offering a slice of pizza. Nor can they jack up our interest rates without prior – 45 days – notice. They no longer can increase your rate by scavenging through your financial records – unless off course you are late on your payment 60 days or more. That sounds all so awesome and overdue but what about he loopholes and how is this gonna benefit the masses?
As always simple mass will lead you to the answer. Looking at the law again I noticed that while credit card companies have all those new restrictions mentioned above, there is no law or regulation prohibiting them from charging monthly fees or yearly fees on your account. Regardless if you are paying your bill in time or not, banks like CitiGroup will charge a monthly fee if you do not spend more than $2400 a year on their card. Others like American Express and Bank of America are starting to charge a yearly service fee (call it membership fee) that really will bring no value to you as the card holder. Ohio based Fifth Third bank is charging $15.00 a month if no transaction was made on the card during that billing cycle.
All those fees are the credit card companies reaction to the fact that they now can no longer sign up “sucker” memebers that they know for sure will end up paying years of interest on their debt.
But this fees will be passed on to all of us. Whether you are a good account or not those fees will apply so how is the government regulatory legislation really help you? Well it doesn’t. It only helps those who have habitually been late on their credit card bill, those who have not been able to manage their open debt and the likes. But you the good, honest credit card consumer is about to take a penalty for something the other guy did.
If the government really wanted to do something they should have set out to ban all those fees and other charges we are all about to see. College students can not get a credit card without a co-signer or proof of sustainable income. Good payers will end up having their credit card benefits like miles and such being cut off in the name of saving to cover other assets, not to mention that all on time payers will still get a fee and an interest rate increase. Looking t statistics for the last 12 month, the median interest rate credit card companies were charging in 2008 was 12%, that is 4% lower than what we are all set to receive in 2010 and 2% lower than the media for 2009.
Banks adjust to government regulation and so should you, and unless we all learn what credit card debt and open credit line means we will never have the upper hand on the BIG BANK company. Again like I mentioned in a blog yesterday, it all starts with educating the people and the future consumers. A person well aware of how recurring debt works will never end up in the shoes of Sarah Miller, a student from Ohio, that is now 40K in debt after receiving a no limit American Express when she was 20 years old.
