Archive for the ‘Credit Laws’ Category
The economic downturn and the restrictions placed on credit card companies by the Credit CARD Act are making card issuers change the way they do business. Prior to the Act, consumers with bad credit could obtain cards with low limit and hefty upfront fees. But under the Act, issuers cannot charge high fees. Due to this, the card issuers are raising interest rates to cover the increased risk they take by offering cards to people who need credit help.
How will the CARD Act affect different cards?
The CARD Act will affect all types of cards but the impact will differ. Some of the ways it will affect various cards are:
Balance transfer cards: Most consumers are able to get cards that offer no or very low interest rate on a transferred balance for much more than a year. But this will now change. Card issuers will be retreating from one-year introductory period to the minimum of 6 months as laid down by the Act. Introductory rate will also rise.
Low interest cards: According to the CARD Act, issuers will not be able to change rates readily. So, they will be very selective in offering cards. Only people who carry high balance and have a good credit history can obtain low interest cards.
Prepaid and gift cards: The Act mandates that prepaid cards will not expire before 5 years. It also imposes pre-purchase disclosure of inactivity fees and certain other fees. The new rules for prepaid cards will be implemented on August 22, 2010.
Debit cards: From July, 2010, new customers will not be allowed to overdraft using their debit cards unless they apply for it before hand. Due to the new rules on overdraft charging, banks may start charging annual fees for debit cards as high as $30.
The Credit CARD Act also requires students under the age of 21, to get a parent co-sign the credit card or prove a source of income. The credit limit on student’s cards may also decrease. Due to the restrictions imposed by the Act, it will be difficult for consumers to get into loyalty or rewards programs.