Credit card issuers say the new laws will hurt consumers across the board. Consumer advocates say they won’t. Who will be proven correct remains to be seen.
We do know that credit card issuers will attempt to regain their profit positions by making consumer-unfriendly changes. They’re already making changes quickly in an attempt to secure their positions before the new laws take effect. They’ve been raising interest rates and slashing credit lines ever since the talk of the new rules began. They’ve also been closing accounts left and right – sometimes even for consumers who have always paid on time.
In the months prior to the law being signed, bank industry lobbyists began issuing warnings about the dire consequences to consumers if banks were limited in their practices. Now bankers are still warning that regulations will harm consumers.
Until now, card issuers have reaped huge rewards from penalty fees, as well as interest rates. Under the new laws, many of those penalty fees will be eliminated. Thus, they are contemplating adding some new fees and changing policies that were not addressed by the lawmakers.
One of those policy changes may be a return to the annual fee – especially for those card holders who pay their bill in full each month. When they use their cards, the only revenue comes from the retailer, and banks want more than that. Thus they may be charged a fee for the privilege of using the card.
Other moves that Credit card issuers have suggested in their warnings:
• Less rewarding rewards – A scaling back on cash-back incentives and other rewards.
• No more grace period – Interest will begin to accrue from the day you use the card, rather than from the statement date. This will allow card issuers to earn interest from those card holders who pay their bills in full each month.
• Variable rate interest on all accounts. No longer will it be safe to purchase a high-ticket item knowing that your interest will only be 9 or 10%. Unless you purchased during a promotion governed by the new laws, your rate could change at any time.
• Rate hikes across the board. The rates offered to banks’ “best customers” will go up along with everyone else’s.
• Dumping riskier consumers. We’ve already seen a move away from banks offering secured cards and high-interest / low credit line accounts. Now that the “fee harvester” cards will be severely restricted in fees they can charge, these may disappear altogether.
Author: Mike Clover
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