Why the New Credit Card Legislation may not be all it’s Cracked up to be
February 22nd is the magic date when all of the credit card legislation that was passed through the Credit Card Accountability Responsibility and Disclosure Act (CARD) must go into effect. That means that all of the credit card companies must comply with the new terms set forth in the CARD Act.
Although these changes are designed to help consumers better manage their debt and to discourage credit card companies from operating under false pretenses, it doesn’t mean that you can forget about fees and hiked interest rates.
The bottom line is that you still must be a responsible consumer; it does not give you a free pass to spend as you like without consequences.
In addition, don’t assume that just because the government has reigned in the credit card companies on certain points doesn’t mean that they can’t then conjure up new traps in which to catch consumers.
The Fine Print
Most of us are conditioned to simply discard the legal mailings we receive from our credit card company about our credit card’s terms and conditions. However, we must begin to change our way of thinking because the credit card legislation doesn’t deny the right of the credit card company to raise interest rates or impose fees; it simply states that they must warn credit card customers ahead of time.
For example, your credit card company can raise your interest rate on future purchases at any time, but they must also give you a 45 day warning. If you fail to read this fine print in your contract, your credit card company could potentially raise your credit card’s interest rate and you will be none the wiser; that is, until your receive your first credit card statement with a large finance charge.
Fixed-Rate vs. Variable Rate
Another trick that credit card companies have up their sleeves is to turn fixed-rate credit card accounts into variable-rate accounts. This is because the credit card legislation only covers fixed-rate credit cards. In other words, the creditor is free to increase your credit card’s interest rate at any given time if it is a variable-rate account.
The bottom line is that we all have to become better advocates for ourselves and to make it a point to understand all of the terms and conditions associated with our credit cards.
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