Reliable Credit Card Payers Face Higher Charges
Are Annual Fees, Interest Rates and Card Charges set to Rise?
May 24, 2009
The introduction of the Credit Card Accountability Responsibility and Disclosure Act of 2009 provides consumers who are poor payers, due to financial difficulties, with protection against the unfair practices of credit card companies. Within days of the introduction of new legislation, card providers are already planning how they are to recoup these lost profits.
How Has New Legislation Affected Credit Card Companies?
- A credit card bill must be sent to a customer a minimum of 21 days prior to do the due date.
- Should a credit card provider receive payment prior to 5 PM on the due date, it is considered to have been paid on-time and no additional card charge can be applied.
- Customers must receive 45 days notice and an explanation before higher interest rates are imposed on credit card debt.
- The highest interest-bearing portion of credit card debt is settled first.
- Card fees cannot be imposed unless a customer is at least 60 days late making a payment.
- No consumer under the age of 21 will be able to become a primary cardholder.
A New Wave of Credit Card Charges
Providers are set to increase interest rates, reduce card rewards and introduce new annual fees for prompt payers. Edward Yingling, president of the American Bankers Association said that: "Those who have managed their credit well and currently have very good credit card deals will find that credit card companies are limited in their ability to distinguish between them and those that have credit problems."
Can Credit Card Companies Really Work Together?
Despite the plan to introduce higher card charges and new annual fees, it is likely to be difficult for credit card companies to sustain them. The market is extremely competitive and new providers will emerge that offer better deals. The majority of customers are prepared to move and this will force the hand of card providers to match these better deals.
Annual Fees Matter
According to an Aite Group survey, 64% of respondents said that having no annual fee was an important reason why they chose their last card. Credit card companies will quickly identify this and introduce new cards to boost both their profits and customer base. Other lenders will quickly follow suit or face losing high value, low delinquency rate customers.
Credit card companies hoping to recoup lost profits through higher interest rates, annual fees and additional card charges are likely to find that consumers will vote with their feet. The new legislation was necessary to establish a sense of balance between profitable enterprise and pure greed.
Readers that found this article useful may also be interested in identifying the best credit card deal, discovering how effective credit card debt settlement is or finding out how to avoid identity theft.
Sources
Lazarus, David. (May 20, 2009). "Credit card reform becomes opportunity to hammer good customers." Los Angeles Times.
Aite Group survey, January 2008
Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.
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