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.

Consumers with good credit scores are being wooed more now than they have in a few years because creditors are finally loosening their grips on credit and are, once again, offering credit. Because of this, you probably are receiving a plethora of new credit card offers — most of which are offering very attractive rates and promotions.

If you want to take advantage of one of the new credit card offers, here’s what to do:

• Examine your current credit card interest rates, terms and conditions so you have something to compare when you begin looking at new credit card offers. If you have a particular credit card you really enjoy using, you may want to contact the credit card company and negotiate a lower rate or different terms. It is important to keep in mind that it is always best to negotiate better terms with your current credit cards than to open up new accounts.
• If you get nowhere with your current credit card companies, or if the new credit card offers are just too good to pass up, consider paying off any balances on your current credit cards first. It is always best to avoid carrying balances on multiple credit cards because it could put you in a precarious situation if you forget to pay on one of your bills or if you become more spend-happy because you have access to so much credit.
• Amass all of your current credit card offers and compare them, side by side. It is important to not only look at the card’s interest rate, but other factors, as well, such as promotional rates if you are transferring a balance, and the card’s general terms and conditions.
• If you are looking into a rewards credit card, carefully review the fine print, as there is often much more to rewards credit cards than meets the eye.

Before you spend another dollar on your credit card, you may want to first check to see if it is one of the countless credit cards that will see an interest rate hike before the end of the year. Many creditors, in an attempt to beat the credit card legislation to the punch, have chosen to increase consumers’ credit card interest rates before the law goes into effect in February.

What’s Next?

And what does that mean for consumers like you? You guessed it: a potentially expensive holiday season.

Many industry analysts have seen creditors of late increasing credit card interest rates; some to nearly double their current rates. Many creditors have raised interest rates upwards of 30 percent – or more!

And don’t think that these interest rate hikes are for those credit card consumers with less-than-perfect credit.  Many credit card customers who have always played by the rules are even experiencing these credit card interest rate hikes.

A Nine-Month Mistake

Many industry experts knew that this kind of situation would result, as members of Congress gave creditors nearly nine months to consider the implications of this legislation and change up the rules before they take place.

In other words, creditors are getting what they can from their customers while they still can.

Your Rights

It is important to understand, however, that creditors still don’t have cart blanch when it comes to your credit card account. If your creditor raises your card’s interest rate, the new interest rate can only apply to new charges. In other words, if you have a balance of $1,000 with an interest rate of 9.99%, your creditor must allow you to pay off that debt at the current interest rate and not the new, raised interest rate.

There is one catch to this, however; if you fail to make a payment on time or exceed your limit your creditor can then change the terms of your contract, which would likely include an increased interest rate on your existing debt.

So, how do you find the credit card that is best for you?

1. Decide what you need – Do you need a credit card for personal use, or will you be using it for business, as well? Do you need a high credit limit, or is flexibility and a low interest rate more important to you? It may be a smart idea to make your list of credit card must-haves before you begin your credit card search.
2. Compare current interest rates, fees, terms and rewards online – A quick search of the Internet will yield many websites offering current information regarding credit cards. You may want to begin your search for current interest rates on some of the most popular credit cards, and determine which companies are offering the best deals. You may also want to check current special offers, such as 0% balance transfers or promotional interest rates to see which ones work best for your situation.

You will also want to check some of the most popular rewards programs, as well, as you may find a rewards-type credit card that best fits your needs and wants. For example, if you are a frequent traveler, then you may want to check credit cards that feature airline reward points.

1. Sort through credit card offers – After you have done your research and compiled your list of must-haves, you can begin sorting through the credit card offers you have received in the mail. Shred all offers that you don’t accept, and make a pile of credit card offers that you want to research further. You may also want to check online offers for credit cards, as well.

Once you have narrowed your choice down to one or two credit cards, carefully read the terms and conditions of the credit card and, most importantly, make sure that you understand all of the card’s small print before entering into a contract with the company.