The final package of new credit card rules went into effect Sunday. The last set of rule changes sets out to restrict late payment costs and also other scams disguised as penalties. This completes a major overhaul of the credit card industry that was set into motion by the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. One of the newest federal laws cuts late payment fees to an average of $25.New guidelines have been gradually introduced that are cutting into lucrative penalty charges. In response, credit card companies have dramatically hiked rates of interest. Another rule requires them to justify those increases to federal regulators.
Acquiring late penalties and interest rates in check
The newest credit card rules enacted Aug. 22 prohibit credit card businesses from charging more than $25 for late payments, end the practice for charging customers for not using their cards, and order them to reconsider interest rate increases imposed beginning from Jan, 1, 2009. A CNN article on the brand new credit card guidelines said that if the market conditions that warranted the rate of interest increases no long exist, those interest rates must be adjusted accordingly. Charge card corporations could be held to account by government regulators assigned to evaluate their justifications. However, the new rules give banks wiggle room to hike penalty fees higher than $25 if a cardholder is habitually late with payments or if the credit card business can prove the high fee is justified to offset the cost with overdue repayments. More enforceable limits are possible with one more new rule that bars card-issuers from charging a penalty exceeding the minimum monthly payme! nt, or a penalty exceeding the dollar amount of the violation of the credit limit.
Charge card companies scheme to help you recover shed gigantic amounts
The latest round of new credit card rules could subtract $3 billion a year from credit card business bottom lines. A Wall Street Journal report on the charge card industry’s reaction to the regulations said that issuers have been busy upping the ante for balance transfers, money advances, overseas charges and also annual fees. As a strategy to get around limits on late payment fees and penalties, cardholders can expect their minimum repayments to rise. Charge card companies that have gotten used to huge piles of free money from penalty fees aren’t relinquishing them without a fight . The Journal interviewed an industry executive who said last year banks siphoned approximately $11.4 billion in overdue charges from their charge card customers. The windfall is forecasted to slip to merely $8.1 billion-a 29 percent decline.
Credit card companies know their customers
Rates of interest have been raised by charge card businesses to combat the added consumer protection provided by the new charge card guidelines. A separate CNN story on the subject said that interest rates on existing credit card customers swelled to a 14.7 percent average within the second quarter-13.1 percent higher than 12 months ago . The gap between the average charge card rate of interest as well as the prime rate is presently 11.45 percentage points, the widest margin in 22 years as outlined by Synovate, the market research affiliate with Aegis Group. Synovate also said that credit card spending reached the second-highest level ever within the second quarter.
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Wall Street Journal