Credit Card Quick

The Transparent Credit Card Industry: But is it?

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The CARD Act (Credit Card Accountability Responsibility and Disclosure Act) was enacted by Congress to ease the strain of credit card costs for consumers. However, nearly a year later, many wonder whether the CARD Act was as beneficial as it was touted to be.

The Transparent Credit Card Industry

One of the largest goals of the CARD Act, according to Congress, was to increase credit card transparency for consumers. In other words, this new legislation requires credit card companies to inform consumers, at least 45 days in advance, of credit card interest rate hikes and provide them with opt-out features.

However, along with the positive often comes the negative, and the CARD Act has its share. For example, many economists believe that the increase in credit card interest rates is directly related to the CARD Act. In other words, creditors are searching for ways to recoup losses they incurred as a result of the new legislation, and they are doing so in the form of higher interest rates for nearly every consumer across the board.

Consumers Affected by Credit Availability

In addition, the Center for Responsible Lending study shows that the CARD Act “confused consumers further and did not reflect rates or availability.” Kenneth Clayton of American Bankers Association believes that the cost of credit and the availability of credit were “negatively impacted by the act; particularly working-class Americans.”

Many credit card companies, in response to the CARD Act, have also cut credit limits and have become choosier regarding to whom they will offer credit. In other words, the higher credit limits and easy availability to credit you’ve enjoyed for years may not be so easy to find anymore.

It is important to remember that, although there are negative aspects to the CARD Act, there are a number of features that protect consumers from shady credit card practices. Most credit card industry experts believe that consumers with good credit scores will benefit most from the CARD Act, while those with less-than-perfect credit may struggle to obtain credit cards with competitive rates.

Credit Card Interest Rates Continue to Climb: But Why?

Introduction

The trend continues. Credit card interest rates continue to climb, but the reason why is more than a bit murky.

Some experts say the increase in credit card interest rates — the average credit card rate rose to 13.44 percent at the end of 2010 — is due to the lackluster economy, while the credit card industry states the reason for the increase is because they are merely responding to the loss they endured as a result of the CARD Act. Finally, some creditors have pointed out that they must raise credit card interest rates because of a higher rate of delinquencies among their customers.

The Effects of the CARD Act

Some of the regulations under the CARD Act include a freeze on rate hikes on existing balances or during the first year the account is opened; a 45-day notice before the creditor can increase the interest rate on your card; and late fees can no longer exceed $25. It is these changes, the credit card industry notes, that have forced credit card companies to slowly raise interest rates.

Many economists expect that, even as the economy improves, we will likely continue to experience increases in credit card interest rates because credit card companies are still feeling the effects of the CARD Act legislation.

Economic Woes Play an Important Role

The economic woes of the country have no doubt also played a significant role in the rise in credit card interest rates. As such, it is clear that the credit card industry is imposing strict rules, and higher interest rates, on individuals with less-than-perfect credit.

Finally, the credit card industry will likely continue to raise interest rates because many credit cards of today are tied to variable rates. As the economy continues to improve, the prime rate will follow, thereby causing interest rates to climb.

As always, it is important to keep a close eye on your credit card’s interest rate and to read all information and correspondence you receive from your credit card company, as it could indicate a change in your credit card’s interest rate. If you don’t think you’re getting the best deal on your credit card, check out the many online credit card offers to see if there are more competitive rates available to you.

Creditors Set their Sights on Small Businesses Once Again

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As a small business owner, you may have found the process of obtaining credit over the last few years quite difficult. However, as lenders begin to, once again, lend to consumers, small business owners may also be able to secure a business credit card without too much hassle.

The Past Haunts Small Businesses

In the past, many creditors were reluctant to offer credit to small businesses because many businesses were unable to pay on their balances because of the lackluster economy. As a result, the number of small businesses that rely on credit cards has decreased dramatically.

In fact, according to the National Small Business Administration, nearly 50 percent of all small businesses in the past relied on credit cards. However, over the past year, that number has fallen to just 30 percent, and credit cards are now ranked in third place when it comes to small businesses seeking financing.

Are Small Businesses Ready to Use Credit Cards Again?

Because of the events of the past, couple years and the decreasing number of small business credit card holders, creditors are once again wooing these individuals. They hope that small businesses, now that the economy is improving, will once again return to credit cards as a source of financing. But have small businesses given up on using credit cards?

It is no secret that, in addition to creditors pulling back the number of credit card offers to small businesses, many small businesses cut their ties with credit cards because they weren’t afforded the protection offered to consumers under the CARD Act.

Another factor that is making small businesses wary about applying for a business credit card is that fact that business credit card rates rose faster than any other type of credit card in 2010; meaning that small businesses were being socked for very high interest rates while consumers enjoyed much lower interest rates. In addition, businesses are also not exempt from penalty rates. In other words, one missed payment by a small business could spell catastrophe in terms of their credit card rates.

The jury is still out on whether small businesses will return to credit cards, so creditors must do everything in their power to woo their customers back.

Congress Seeks to Limit Credit Card Interest Rates

News

If Congress has its way, there may be yet another change to the credit card industry.

In short, Congress has introduced a bill that will limit the amount of interest a creditor can charge you. Called the Interest Rate Reduction Act, this legislation will limit the interest rate on credit cards to just 15 percent, thereby making it, perhaps, the biggest change in the credit card industry to date.

Authored by U.S. Representative Maurice Hinchey, the Interest Rate Reduction Act is a way to help American better make ends meet in this challenging economy. Hinchey states that “credit card companies are finding new ways to squeeze the middle class despite significant reforms in the last Congress.”

In other words, it is clear that many members of Congress are dismayed that creditors have found a number of loopholes in the credit card legislation that was enacted last year. The only exception to the 15-percent rule, under this new legislation, is the ability for a creditor to raise interest rates if they would be “in dire financial straits otherwise.”

Although this new legislation has only been introduced, it is a distinct possibility that Congress can get it passed. In the meantime, however, it is important to pay close attention to your credit card’s interest rate so you can be sure you are getting the lowest, most competitive rate. Here’s what you need to do:

• Pay attention to all literature sent by your credit card company. Because the CARD Act requires credit card companies to inform consumers, in advance, of changes to their credit card accounts, you may find that your creditor is sending quite a bit of literature to you, either by itself or with your credit card statement. Although it may seem quite inconvenient to read this literature, it may detail changes in your credit card’s interest rate. In other words, take the time to read any and all information you receive from your creditor.
• Beware of introductory and balance transfer rates on your credit card accounts. Although introductory rates can be quite attractive, the creditor may raise your rates significantly once this special period has ended. In short, pay close attention to the default interest rate on a credit card if you are accepting an introductory rate.

Negotiating your Way to Lower Credit Card Rates

Introduction

According to information obtained by IndexCreditCard, credit card rates are nearing all-time highs. The near-constant increase in interest rates is likely coming off the heels of the CARD Act that was enacted last year. This legislation was passed in an attempt to force creditors to become more transparent regarding their cards’ terms and conditions, and to also limit them from charging consumers outrageous – and often unfair – fees.

As a result, credit card companies have been looking for ways to recoup their losses, and it looks like they are coming in the form of higher interest rates.

If you find that your credit card interest rate has become too high, you may wonder if there’s anything you can do about it.

In short, if you have a strong credit score to back you up, there is a good chance you can negotiate a lower rate with your credit card company. Here’s how:

• With your credit card statement in front of you, contact the credit card company and ask for a rate reduction. Make sure to point out that you have always consistently paid your bills on time and you have proven yourself to be a loyal customer. If you feel as if you’re getting nowhere with the customer service representative, ask to speak to a supervisor and plead your case to him or her.
• Often times, threatening to close your account is enough to get your rate lowered, so try this tactic if you are prepared to do just that if they won’t play ball with you regarding your credit card interest rate.
• Many credit card companies are, once again, opening up credit to good customers, so consider checking out all of the credit card balance transfer offers you are likely receiving in the mail and transfer all of your higher-rate balances onto a new, lower-rate card. The good news is that, in addition to creditors extending credit once again, they are also luring good credit card consumers in with great balance transfer deals, so consider the terms and conditions of a creditor’s balance transfer offer when deciding which card is right for you.

How to Always Win at the Credit Card Game

Introduction

The Credit Card Accountability, Responsibility and Disclosure Act (CARD) that was enacted into law in May 2009 has accomplished what so many consumers had been hoping for over the years: to make credit card companies become more transparent and to eliminate certain credit card practices that were less-than-fair.

However, in response to the CARD Act, and perhaps because many credit card companies cried foul because some of the changes in the legislation meant that they were losing money, creditors began finding ways around the legislation. Therefore, many consumers were left even more confused than before the CARD Act was even enacted.

If, after all of the changes enacted by credit card companies, both to adhere to the new CARD Act guidelines and to avoid losing a great deal of money, you are still quite confused, then it is up to you to engage in a number of activities that will, regardless of what legislation is passed, protect you and make you a winner at the credit card game.

• Always pay your bill on time – OK, so this sounds rather obvious, but the fact is that many consumers still fail to do this on a regular basis. The truth is that creditors cannot charge you any kind of fee if you pay your bill on time. They can’t change your credit card interest rate and they can’t charge you any late fee. The best rule of thumb is to set up automatic payments through your bank so that you can be assured your credit card bill is paid on time, each and every month. If you pay your bill in full each month, set a reminder on your desk calendar or smart phone.
• Don’t reach for the convenience checks – Creditors love to send out those tempting little advance checks, also known as convenience checks. But you must be strong and send them to the shredder, as they are riddled with all kinds of fees and higher interest rates, and they are not protected by the CARD legislation. In short, there should never be a time when using convenience checks are OK.
• Read any material that is sent to you – Because creditors must inform consumers of any changes to their credit card account, you may find yourself receiving more correspondence from your creditor. Avoid the urge to toss the letters into the garbage can and instead take the time to read them so you can always be aware of any changes to your account.

Your Guide to Making the CARD Act Work for You

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The CARD Act, the new credit card legislation enacted earlier this year, was designed to help credit card consumers manage their credit and keep creditors in line by eliminating outrageous fees and difficult-to-read (if not nearly impossible) terms and conditions.

However, it is important to point out that, in response to the CARD Act, many creditors took steps to protect themselves and, as such, some credit card consumers may benefit from the legislation while others may not. Here’s what you’ll need to do to ensure that the CARD Act is working for you:

• Keep a close eye on your credit card paperwork – You may be receiving more correspondence from your credit card company, and some of it may be just small notifications that appear to be junk mail. Because the CARD Act requires creditors to give you adequate notification of changes in your card’s terms and conditions, it is important to keep a close eye on any correspondence you receive from your creditor. In other words, you must read those annoying little pamphlets if you expect to be kept in the loop of any changes to your credit card!
• Take advantage of the charts now provided on your statement. Creditors are now required to provide consumers with payoff information regarding their account. A typical chart on your credit card statement will likely show how long it will take to pay off your account paying just the minimum balance (and the total interest you will pay!) and how long it will take you to pay off your balance paying a higher payment each month. This information can be very useful when budgeting yourself and working towards paying off your credit card debt.
• If you don’t use your card, expect it to be canceled. If you have a credit card that you use just for emergencies, the creditor may very well cancel that card. To avoid this, make it a point to use your card at least a couple times a year and pay the balance off when the bill arrives.
• Expect to pay a higher interest rate on your credit card. Creditors, in response to the strict regulations set forth by the CARD Act, raised their interest rates to recoup some of their losses. However, these higher interest rates can still be negotiated, and you have the right to cancel the card and pay off the remaining balance under your old interest rate if your credit card company raises your interest rate and doesn’t want to negotiate with you for a lower rate.

CARD Act Loopholes you Need to Know About

Introduction

All credit card holders will certainly benefit from the CARD Act and the protection it offers them. However, just like any other type of legislation, creditors have found loopholes in the CARD Act.

What does this mean? In essence, it means that you, and you alone, are ultimately responsible for understanding how your credit card works, as well as the card’s terms and conditions.

If you are thoroughly confused (who isn’t?) about the CARD Act and the ways in which you may not be covered, here is a list of things you may want to watch for:

• Your interest rate may be increased during the first year, in certain cases – Although the CARD Act prohibits creditors from raising your card’s interest rate during the first year, there are exceptions to this rule. Your interest rate can increase: if you have a credit card with a variable interest rate that is tied to an index; if your account is 60 days past due; and if your interest rate is tied to a promotional rate.
• Your credit card account may be closed, without warning – Your creditor does not have to provide you with notice if they decide to close your account, reduce your credit line or cancel any of your credit card privileges. The only circumstance under which they must provide you with notice is when they impose a penalty for exceeding your credit limit.
• If the creditor imposes a rate increase, you cannot reject it – You can certainly close the account and pay off your balance under your current interest rate, but you cannot reject the rate increase on future purchases.
• If the terms of your credit card are disclosed in the account-opening table, you do not have the right to reject the changes – You also do not have the right to reject an increase in your minimum payment amount.
• THE CARD Act cannot put a cap on penalty interest rates – Although the CARD Act protects consumers from an increase in interest rates without warning, creditors are under no obligation to cap their penalty rates. In other words, it is not out of the ordinary for a creditor to change a 10 percent interest rate to nearly 30 percent if a penalty is imposed.

Your Guide to a Healthy Relationship with your Credit Cards

Introduction

You can have a healthy relationship with credit cards! You can use them to your advantage without becoming embroiled in credit card debt! All it takes is a bit of forethought and a firm understanding of the pitfalls of credit card debt.

• Begin by understanding the current credits you have and if they are still working for you – The best first thing you can do is to take an inventory of your current credit cards to make sure that they still have what you want and need. Take a look at the interest rate on your credit cards, as well as any other thing you may need to use the credit card for, including balance transfer offers, credit card insurance and protection and rewards features.
• Consider your needs and choose a credit card based on them – In order to guarantee that you have found a credit card that’s right for you, you must first consider your credit card wants and needs. For most individuals, a good credit card with a low, fixed interest rate will be suffice, while some individuals may find value in rewards and cash-back credit cards. Of course, the credit card you choose will be a personal decision, so take your time to explore your options when it comes to credit cards.
• Make it a point to thoroughly understanding the rates, terms and conditions of your credit card – Before you accept a credit card offer, take the time to read and understand every aspect of the credit card; otherwise you could be setting yourself up for disaster. If you are accepting a card with a 0% introductory interest rate, for example, make sure you understand the terms of the promotional rate and the rate you will be charged once the promotional rate has ended. If you accept a rewards credit card or a cash-back credit card, read the fine print so you can be sure you understand the best ways to earn points and redeem them. Although the CARD Act has made credit card companies become more forthright when it comes to their terms and conditions, it should never replace your responsibility of understanding the card and its terms and conditions.

APR 101: What you need to Know

Introduction

One of your responsibilities as a credit card holder is to fully understand your credit card.

Although the CARD Act certainly has helped protect consumers regarding their rights, it is still ultimately up to us, the cardholders, to understand the terms, rates and conditions of our credit cards so that we can always make the best decision regarding our credit.

One of the most important aspects of any credit card is the interest rate, or the APR. Sure, you think, I know my card’s interest rate, so I’m covered.

But it may not be as simple as that.

Understanding your credit card’s interest rate is not quite as cut and dry. Here are a few questions you may have regarding the interest rate on your card:

• What is the APR?

The annual percentage rate, or APR, is what you want to look for when determining your card’s interest rate.  Although the APR is generally straightforward, it may be of either the fixed or variable variety. A fixed interest rate will not change unless it is a promotional rate or if you fail to meet your cardholder terms and conditions, while a variable rate is one that will change and is often tied to the prime rate.

• Can my card’s APR change at any time?

The only way your card’s fixed APR can change is if the credit card company provides you with written notice of the change. A variable APR, however, can change at any time, so you will need to keep an eye out for any rate changes.

• What is a default APR?

A default APR, which will be clearly listed alongside your card’s APR in the terms and conditions section of your credit card statement, is charged when you fail to meet your cardholder obligations. For example, your credit card company may charge you a default APR if you are more than 60 days past due on your account. However, the default APR can only be charged on future purchases, and you can opt to cancel the card and pay off your balance at the previous APR if you feel the default APR is too steep.