As I’m sure you’ve heard by now, there is a new federal credit card law that finally just went into effect February 22, 2010. The intent to these credit card law changes was to add protection for consumers, but according to this Boomer, they have missed the mark by a mile. Here’s a some reasons why the new credit card laws aren’t what they are cracked up to be.
Pros and Cons of the New Credit Card Laws of 2010
- Good thing. Your next credit card statement is going to show you just how much that card really cost you to use.
- Bad thing. It will give a lot of people a upset stomach because they know how much that card really cost them (which maybe is not all that bad).
The real problem is that for the last nine months the credit card companies have been preparing to make sure they are protected too! They have been raising rates, creating new fees, and cutting credit lines. So the law hailed as the most sweeping piece of consumer legislation in decades has helped make it more difficult for millions of Americans to get credit and made that credit more expensive. Now don’t misunderstand me, that is all not bad! Giving people credit when they have no way to pay for it, is not a good idea. It simply raises the cost for those who are responsible enough to control their own spending to meet their own means.
Consumers will save at least $10 billion per year from interest increases alone according to PEW Charitable Trust, which tracks credit card issues. But there was a catch. Card companies had nine months to prepare for the changes while certain rules were clarified. They used that time to take actions that ended up hurting the very people the new rules were suppose to help.
Changes Made by Credit Card Companies:
- Resurrected annual fees.
- Created new fees and raised old ones. (some added fees to accounts for not carrying a large enough balances!)
- Slashed credit limits for millions of accounts that remain open. This could effect 0% interest credit cards on balance transfers.
- Changed fixed rates on million of accounts to variable rate which can rise with the market.(with interest rates at a all time low that means future rates will only go up!)
- Killed many unprofitable accounts (even for those who have never missed a payment and have excellent credit).
- Made it harder or maybe even impossible for some people who easily got credit to get it in the future.
Other Credit Card Law Changes
No “cards for kids”. Anyone under 21 years of age will now have to have a co-signer and proof of income. Card companies will no longer be able to promote credit cards on campus with giveaways for signing up.
In general, if these common sense rules which should have been policed by not only the credit card companies and banks, but also the card holders themselves would have been followed for the last 10 to 35 years there would never have been a credit crisis in 2008-2009. There would also not be exorbitant fees and rates.
It doesn’t change the fact that a person over 21 who can show proof of income, but has who has no intention of paying their credit card bill or an illegal immigrant who is a felon can still get a credit card that responsible card holders will end up paying for.
What this new law now does however, after the horses have already left the barn, is screw the responsible card holders by charging higher fees, slashing credit limits, and raising interest rates and it screws those who are trying to establish first time credit by denying them credit all together. It does however, do a great job of protecting credit card companies and making sure that the $10 Billion intended to be saved by consumers doesn’t come out of their record profits.