There is no cap on the interest rate card companies are allowed to charge. While companies can't hike your rates on existing balances unless you're 60 days late with a payment, they can raise rates on future purchases any time and for any (or no) reason...More at the link.
While the CARD Act has limits on the severity of penalty fees you can be charged, there's no rule against card companies making up as many new fees as they can conjure [annual fees, paper bill fees, inactivity fees] and charging whatever they like for them...
We told you card companies can't hike your rates on existing balances. That's true as long as you have a fixed-rate card instead of a variable rate card... This is the reason why card issuers have been switching people to variable-rate cards as fast as they can print out and mail the notices.
Your card company can lower your credit limit or close your card without giving you any warning at all... issuers tend to close cards that are inactive or aren't used very often...
26 January 2010
Loopholes in the Credit CARD Act
The credit card reform bill becomes effective in February. Walletpop has these reminders:
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The act is really a detriment to those who use credit to their own advantage. Banks will also not be allowed to apply payments to lower APR balances first - by this new law they must first apply ALL payments by default to the highest APR balance. So if you have a small, low APR balance, but you take an offer of a short-term, no-interest loan with a future higher-rate increase, the credit card companies don't really stand to make any money when you can't pay the no-rate loan off before it begins to accrue interest at the newer rate.
ReplyDeleteTo someone who manages credit well, a six-month $5,000 loan can be put to very good use in another investment, and be repaid before the loan starts to accrue interest. But because the new law essentially takes away any advantage for the credit companies, this type of offer will be harder and harder to come by.
Oh well. As a good friend likes to say, "I like banks. They pay me well."
Your card company can lower your credit limit or close your card without giving you any warning at all... issuers tend to close cards that are inactive or aren't used very often...
ReplyDeleteThis holds for cards with regular, low balances as well - had a card used solely for subscription payments (~$50/mo) which never carried a balance for more than 30 days and it was summarily canceled by the issuer months ago.