Credit Card Companies Find New Rules A Little Stifling

Regulators are expected to issue a new rule today that will help crack down on some of the most unfair business practices of Credit Card Companies. For decades consumers have been forced to agree to go along with sudden interest rate increases, ridiculous fees and fines. Banks are already reducing the amount of credit available to consumers, even with the bail-out packages. There’s no doubt that this much needed rule revision will only increase the banks actions to protect their profit margins.

Let’s be clear, it doesn’t really seem fair that after getting this huge bail-out package they actually want to hold back as much of the cash as possible. It’s very important for business espcially to have avialable lines of credit. Unfortunately only time will tell if and when the banks start to release capital to business owners and consumers.

Some of the new rules expected to be implemented are:

• A credit card issuer will not be able to raise rates on exsisting debt  unless it’s associated with the end of a promotional period, or if a payment is more than 30 days late.

• A rule that will prevent credit card companies to apply payments only to lower interest debt. For  instance if an account is over limit, the interest rate may be 12% higher (or more) for any balance over limit opposed to the regular under limit balance. Many companies will apply payments first (and the interest rate associated with that debt) to the over limit balance. This essentially enables the company to receive a higher interest rate overall.

• A new rule will bar banks from charging late fees unless they’ve given consumers a fair amount of time to submit the payment. The rule will give consumers 21 days from the due date to pay before they’re hit with a late fee. The maximum late fee is up to $39.

On average the industry charges the following fees:

Average penalty rate - 26.9%

Average late fee - $25.90

Average over limit fee - $29.13

Average annual fee - $43.50

Average returned payment fee - $32.03

Percent that change APR for “any reason” - 77%

Percent that change APR because of record with other creditors - 45%

Average grace period - 23 days

Amount that require arbitration to settle disputes - 71%

Hopefully the credit card issuers will find that having better overall business practices might actually increase their overall returns. Many consumers are simply walking away from their credit card debt. They’ll simply write it off in their mind and instead contract with a debt reduction company or tax relief agency who offers similar services.

Again only time will tell, and hopefully we’ve all learned something from this crisis.