On May 22, 2009, President Obama signed into law a package of changes and limitations to curb ever-increasing credit card interest rates and fees. Unfortunately, that credit card legislation will come too late to help many consumers suffering today.
The effective date of the Credit CARD Act of 2009 was set for February 22, 2010. Why this was scheduled so far out puzzles me. Perhaps the intent was to allow banks and credit card issuers to prepare for the changes the legislation required. Instead, the opposite happened.
On October 28, 2009, the PEW Health Group, an individual trust that is part of the nonprofit organization The PEW Charitable Trusts, released their report on a review of actual banking practices as they compared to the upcoming legislation. They found that on average, credit card interest rates had risen from the period of December 2008 to the time of their study in July 2009 – two months after President Obama signed the legislation.
“We found that median advertised interest rates on bank credit cards were between 13 and 23 percent higher compared to rates in December of 2008, depending on a consumer’s credit profile.”
Consumer complaints about penalty interest rates have continued to increase since the legislation was signed. The implication is that banks have been jacking rates to prepare for the reduced income they will experience as a result of the Credit CARD Act.
On October 26, 2009, the Associated Press reported, Senate Banking Committee Chairman Chris Dodd proposed an immediate freeze on credit card interest rates. The article also reports this is not likely going to happen.
Another proposal has been put before the House that would move the effective date of the Credit Card Act of 2009 up to December 1st. That also seems to stand little chance of being finalized.
The end result?
A nice attempt by the government to protect consumers carried out in such a way as to allow the banks a lot of lead time to position themselves well by making consumers pay the bill…again.
Think you are safe because you don’t carry a balance on your credit cards?
Not true.
Several banks are reporting that they have or will be introducing increased annual fees on credit cards, surely as a way of making up the lost income they forecast after the 2010 changes. It appears there is no escape from the escalating cost of credit.
One way to get back on track and skip paying banks large amounts of interest and fees is to stop or reduce the reliance on credit and find free ways to manage your money online.
Reloadable credit cards are not an extension of credit. There are no interest rates and no overlimit fees. These cards simply let you use your money through electronic means – the most popular method of financial transactions today. In fact, opt for direct deposit to fund your reloadable credit card and you might find you end up with a no-fee credit card option to replace your checking account or credit cards.
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