New Credit Card Laws Have Too Many Loopholes?

Where there’s a will, there’s a way, and there’s most definitely a will to maintain profits as much as they can, for their shareholders and of course for themselves, for the credit card companies, which were a huge cash machine for so many years because they basically had the run of how to do business,and few limitations on them. For instance, they really did not have any limits imposed on how much might be too much for a late fee.

Or take for example, how they really had a lot of leeway on the reasons they could just jack up someone’s interest rate without a lot of notice, or their monthly payment, without much notice at all, putting severe hardship on some people, or digging themselves into such deep debt that it was nearly hopeless to get out except for paying off the balances with other low interest cards, or resorting to a credit agency that specializes in getting people out of hot water with credit cards.

Let’s face it, credit cards are probably the biggest reason that people get themselves into debt over their heads. Debt that they truly can’t afford, and debt that they really had no business incurring in the first place because it was way more than what they should have been s pending based on the money they bring in.

And don’t get me wrong, I’m not getting up on my soapbox here, I was in exactly that position starting in college, and it took me years to dig out, and to finally pay it off. Now, with these new credit card laws, we are going to start to learn the painful lesson that the laws have many loopholes (the laws were meant to protect consumers), which are going to become more and more apparent as time goes on.

The scary part is, we already know some of the loopholes, and this law has been in effect less than two weeks! One of the examples is that credit card companies are now coming up with new fees to charge, and new ways to help recoup their eventual losses that are inevitably going to result from the crack down on abusive practices.

One example I saw of this already on one of my credit cards was a previously uncharged “foreign transaction fee”. My creditor had never charged this fee before, and now it does. They also may even charge something called “inactivity fees”. Yep, that’s right, even if you haven’t used your card in a long time, they may charge you upwards of thirty bucks just because you haven’t used the darn thing.

That’s probably one of the most egregious of them all!

There are also loopholes in the random, and sudden shutdown of accounts at the credit card companies will. They can also increase you minimum payment without much notice, and they can decide to lower your credit limit with virtually no notice at all either. So, even thought this new credit card law is going to protect people in some ways, it also leaves a lot of holes open for creditors to take advantage of consumers.

However, if you are smart with your money, you can still use good, low interest credit cards to your advantage, it’s just knowing how to use them without getting carried away, and that’s the tough part for most people.

New Credit Card Act in Effect Today

Today is D Day for all credit card issuing banks. It’s the day that the credit card reform act, otherwise known as CARD, goes into effect, and the day that they stand to possibly lose millons, if not billions of dollars in lost revenue. Let’s talk a little bit about this act, what it does for consumers, what good may come of it, and what potentially may be bad from it, since it probably will adversely affect a business – the credit card business, and right now our economy may not be able to suffer another blow like that although credit card reform in some manner has definitely been needed for years now.

Much of the reason for the loss of revenue for the credit card companies though, is actually a good thing for consumers in the end. The primary reason behind the loss is that they will be very much more restricted in how and when they can raise a consumers credit card interest rate. That’s right, no more arbitrarily raising credit card interest rates any more, one of the biggest reasons people have a love/hate relationship with credit cards.

There has to be certain warnings in place and specific guidelines for them to be able to raise their rates. This is a very good thing for customers, since this is the reason that lots of people found themselves in undiggable debt that they could never seem to pay down. Many times their interest seemed to outweigh the purchases on their credit cards, especially if they were consumers with credit cards for bad credit, where raising rates instantly seemed to be a very common practice.

This part of the legislation, I applaud, and look forward to, because I myself was the victim of credit card companies raising their rates on me over and over, and it’s the main reason that, after I got out of college, I had to seek the help of a consumer credit agency to help me consolidate my debt and make it manageable so I could actually hope to get out of debt one day.

Another piece of information I read about credit card issuers trying to gain back some of the lost revenue, is that they are introducing tons of new fees to try to make up for the lost revenue in raised interest rates. I wondered why I suddenly saw a foreign transaction fee of almost eight dollars for a transaction that I do on my business card several times a month – up until now, with no fee. Chances are, you will be seeing ridiculous fees as well to make up for their loss.

I’m not sure how good this will be. Honestly, it feels like the intentions are good, but right now, with consumer spending already so restricted, is this really going to help the economy get back on it’s feet? Sounds like it may be bad timing for a long overdue reform in the credit card industry. I know it needs to be done, but it’s just going to become another weight on the tight credit market and restricted consumer spending right now.

Consumers Blowing Off Mortgages to Pay Credit Cards

For the first time in credit card history, it seems that more and more consumers are opting to pay their credit card bills first, even before they pay their mortgage payments. The reason may be the increasing mentality and feeling of many homeowners that paying their mortgage is futile when so many other homeowners are under water.

They may feel an increased sense of camraderie, which makes it seem more “ok” to blow off the mortgage payment, or perhaps it’s just more the sense that they may be getting help from the government to pay their mortgage.

Most likely though, more and more people are finding that they are under water when it comes to their mortgage, or the other cleverly termed “upside down” in their mortgage, which means they owe more than their house is worth. This truth is actually causing a huge home abandonment rate, where people just up and leave to go rent somewhere, and letting their homes go into foreclosure. There sure are a lot of people who are going to have bad credit after the fallout is over.

This seems to be the new plight of this decade, as home prices continue to fall and people continue to default on their mortgages at record rates, and the promised government help is slow and incomplete at best.

Because of this mentality, it has been shown that a lot of homeowners who are in financial dire straits, are opting to pay credit card bills before they pay their mortgage. This may also be in part because a credit card bill may seem more affordable and doable than a mortgage bill, since usually a mortgage bill is going to cost ya a lot more than a credit card bill.

I’ve found that lately I’ve been sort of obsessed about my home’s value falling too. But I try not to think about it that way. I’m in my home for the long haul, God willing and job willing, so I try to still view it as a long term investment that will eventually go up in value again after this whole disaster is over.

Did You Stop Getting Credit Card Offers?

Sometimes I really have to laugh about the way credit scores and risk calculations work in the world of finance and credit here in the US. First, there was my dubious experience with the FHA refusing to accept my side business income because it went down from 2007 to 2008 (I think any self employed person’s income went down from that year), then there is the funny idea that my husband, who actually does not have as good of credit as I do, happens to get a lot more credit card offers in the mail than I do.

Sure I’ll get the occasional credit card offer, maybe for a new airlines miles credit card or something like that because they see that I have the United cards for both my debit and credit cards, but I only receive maybe one every month, whereas when I was broke and couldn’t pay bills except for the minimums, I would get them left and right. I also happen to think that paying off the credit cards that you do have every month has something to do with it.

While my husband lets his balances get over into the next month, I’m super diligent about not letting that happen after being real trouble with credit cards when I was in my twenties. I think that creditors look at this and consider the fact that they really won’t make any interest off of you, maybe just the yearly fee, so they don’t want to extend new credit cards to you because of this.

Don’t get me wrong, I don’t mind not getting credit card offers in the mail, I have only about three major credit cards right now, and I actually only use one of them. It’s just easier for me to keep track of them that way, so I make sure that I don’t miss a bill or send one in late. Plus, all my airline mile awards are all consolidated onto one card, and this makes it easier to rack up the points when you only really use one card.

Credit Card Companies are Freezing Rates

In response to governmental pressure thanks to numerous complaints from consumers – people just like you and me who are working paycheck to paycheck, forging along in this world, and making the most payment that we can to our credit cards, many credit card companies are now freezing their interest rates. Let me back up, they are freezing them AFTER increasing them, purportedly as a means to offset changes that are soon going to be signed into legislation that are going to change the way credit card companies can do business with their customers.

What many people were finding was that their monthly minimums were going up, many times exponentially, on their credit card statements, even though they hadn’t actually charged any more and the balance remained the same. They were also finding that they were having portions of their credit line revoked, and that they were also getting outrageous boosts in their interest rates for seemingly no reason at all.

Creditors cited having to do this in response to higher amounts of defaults and subsequent reassessment of risks, but many think that they were really making the most out of squeezing their customers while they still could, before the new laws go into effect which prevent this type of credit card creditor abuse. Whatever the reason really may be, the fact remains that creditors were squeezing people who were already squeezed thanks to job layoffs and cutbacks and increasing costs of living, and something had to be done to stop that.

In response to a lot of pressure from legislators who wrote in to credit card companies after hearing horror stories about how a lot of consumer’s debts were being jacked up to unreasonable and certainly unmanageable minimums, many of our good representatives did write to plead with creditors to put freezes on any interest rate hikes, and indeed many of the larger creditors did do just that, perhaps partially as damage control for their PR, perhaps partly because they really wanted to do something to benefit their customers. Which one it is we’ll never know, but I’m sure you can detect the sarcasm in my voice!

The new laws are supposed to be going into effect soon, in fact to be honest I thought that they were supposed to be pushed through by now already, but apparently that hasn’t happened, or perhaps has already happened. Let’s hope they go into effect soon so we don’t come home to any surprised bills when we get home from that inevitably long, hard day at work!

College Student Credit Card Debt Skyrocketing

When I read the facts and figures about college student credit card debt, I couldn’t help but get that familiar sick feeling in the pit of my stomach that I always had when I was a college student myself and was going through a really tough time dealing with both student loans having to be repaid, no great job to show for my years of school, and a mountain of credit card debt. I admit, I was naive, and I charged so many things on my credit cards as a college student. But it was easy money, and I used it not only for fun stuff but for things I needed at the time like groceries and car repairs so I could actually eat and get to the job I had waiting tables.

So many other college students fall prey to this as well, because many of them don’t even work. Some have help from their parents, but that doesn’t cover all their bills, and they end up getting in debt so deep over their head that it feels overwhelming when they get out, like they’ll never dig their way out. With today’s job market, we are seeing more and more college students graduating with mountains of credit card debt and debt from tuition that can’t get a job in the field they went to school for. They are forced to work jobs that don’t pay so great, and at the same time, their living expenses are barely getting paid because they have all this debt to repay.

It’s enough to make anyone feel like they want to bury their head in the sand and never come back up to reality. The statistics are nothing short of depressing on the current state of affairs for recent college grads. Apparently, the number has skyrocketed up to 41% more debt for college students over just the past four years, which means they are paying more and more credit card debt, and that amount went up within a matter of just a few short years. Now, with the credit crunch and the reigning in of credit card companies offering so much easy money, we may see that shrink, but still, it’s a state of affairs that needs to somehow stop.

Because of this squeeze on recent college grads, the default rate on college student loans has also increased over what is considered to be an acceptable amount, with students so squeezed by other higher interest bills that they choose to default on the loan that actually is giving them a good deal. They are trying to pay off the higher interest debt, but foregoing the low interest debt that is the student loan, which may be hurting them even more, and is certainly burning their credit score in the long run. Credit cards for college students should be reviewed carefully before one signs up. Make sure the interest rate is fair and that there isn’t fine print stating they can raise it to an enormous percentage if certain conditions exist.

Credit Card Holder Bill of Rights?

That’s right, for all of us who feel that we have been treated unfairly or misled by those ever so tempting credit cards of all types, there may be some sort of a bill set forth by congress that spells out what a credit card holder’s rights should be in the credit card and spender contract (you have a contract with your creditors pretty much when you agree to sign on for one, that you will pay your monthly bills pretty much no matter what, or else they can send collector man after you).

The cardholder’s bill of rights would cut down on the most abusive practices of credit card companies. These unfair practices are things like increased monthly payments for no reason, large increases in interest rates at the whim of the company, retroactive force payments, unfair late fees and excessive fees for overage costs that go over the monthly spend limit and also for being late on payments, and what they call misleading advertising of interest rates that you think are one thing and then end up jacked way up when you’ve had the thing for a year or so. And so on and so forth. You get the picture.

Democrats are pushing for this bill to happen because they say that the American consumer is being duped into paying large fees, interest rates and more at the expense of wasted income. The bill will actually ban the practices, so the card lenders will be forced to have certain practices. I’m not sure if this is good for overall business, I just hope that it doesn’t cut down so much on credit card company’s profits that they hesitate to extend credit to consumers, which will only add another wrench into the dismal consumer spending that has lended to the recession we find ourselves in.

I agree that something needs to be done though. I just don’t know what the answer is. As far as legislation, yes I do agree that something needs to be done, I just hope that creditors are flexible enough to be able to still be profitable and extend enough credit even when they feel it may not be the most profitable situation always.

Changes Coming In July 2010 on Credit Cards

There are quite a few changes coming on a bill that was passed (a piece of legislation) that puts a lot of restrictions on credit card lending that were never there before. Some may think that this new list of restrictions may be bad for the economy in that it makes credit card lending more expensive for the credit card companies and therefore less desirable for them to market and grant credit to a lot of consumers and stalling the economy further, but there are countless others who think that this type of legislation has been a long time coming and is overdue, to protect the consumer from themselves and also from predatory and unfair lending practices in the process.

Among the changes to credit cards coming in July, they will not be allowed to grant credit cards to anyone under the age of eighteen, nor market them this way. This means that the government will be protecting young people with immature planning and fiscal responsibility from making a mess out of their financial future right from the get go. I agree with this one. I lived without a credit card til I was eighteen, and even then I used it way too much and got myself in trouble, whereas when I matured I realized this was no way to live and paid it all off, so I see why younger people need to be protected from making the same mistakes that they potentially can never climb out of again.

Another change is that charges for payments over the phone will be banned. Right now, many credit card issuers will actually charge their customers an additional fee for doing the responsible thing and making their credit card payment over the phone. I mean, that’s ridiculous, and that should be banned if you ask me.

It would also put a stop to the practice of increasing interest rates for those that have a late payment or two and also put certain restrictions on jacking up the monthly amount due when someone’s rates go up, all of which are consumer protection measures. As to whether they will work or whether they may make getting credit a lot harder, time will tell.

The Importance of Getting Good Credit Cards

Getting a good credit card means getting one with fair terms, a low apr, or prime annual percentage rate, just in case you can’t pay the monthly bill off every time and are in turn paying outrageous returns to someone other than yourself, and one that is not going to jack up you rate indiscriminately.

Unfortunately, in today’s climate of economic fear and companies pulling back on both their rewards on the credit cards that used to entice us to use them, and the lower interest rates, as well as the annual fees and the fact that you may have a lower monthly payment and higher limit.

With the new policies of so many banks that have gotten burned by these tough financial times, getting new revolving debt instruments with good terms and a generous credit limit has proven harder and harder as everyone scrambles for the same thing – better rates, good limits, and no annual fees. Business people that I know have been complaining about the credit card’s policies, because it is stifling consumer spending, which was once a lot more agressive when more credit was available on fair terms to consumers.

Now, many people are really giving thought to shopping around for credit cards. They aren’t just signing up for the first thing that comes along, which could very well be one that is not really fair to them or is definitely more beneficial to the lender rather than the consumer.

American Express Actually Pays Customers to Close Out Accounts

Did I read this right? American Express, one of the biggest credit card lenders in America, is going to start offering to some of it’s customers to shut down their accounts with them, and get compensated for doing so. I’ve heard of compensating or rewarding customers to do certain things – like maybe buy something new or buy something specific at a specific time, but never a company paying customers to stop using their services, but hey I guess these different times call for different, albeit even strange measures.

But there is a catch, first you have to be part of a selected group that apparently the company does not deem as being profitable enough, and second you also have to pay off any existing balance on the credit card before you are compensated. But the price they are paying for these voluntary shut downs of accounts is pretty good I’d say, three hundred dollars!

American Express is just one creditor among hundreds who is really feeling the pain of the recession and is facing increasing losses with every month that passes due to people not paying their bills or stiffing them all together, which is surprising because American Express caters to the upper class when it comes to economic structure, and apparently they are suffering just as much as the middle and lower classes.

All credit card companies have responded to the crisis by scaling back on people’s available spending balance, as well as randomly increasing minimum payments and also sometimes even repricing the accounts into higher APR percentags, which is making it harder for many people to pay their card bills every month, and which is also hurting the economy further because it seems like all this easy credit isn’t there any more, and reducing the circulation of “money”, albeit not actual real money, in the economy.

Retailers are feeling the hurt because people aren’t using their credit cards as much due to these scale backs. Heck, I’m in a sales related business part time, and I’ve seen my sales slump tremendously since October of 2008, and I know it’s because people are scaling way back on credit card use.