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CREDIT CARDS

Vigilance required

>> Credit card companies (maybe yours) are not going to take implementation of the Credit Card Act lying down. They’re busy with a whole bunch of things, like cutting back on rewards programs, inventing new fees, and just plain raising rates.

Self-defense: Call your card company and ask what they’re doing—and planning to do. Let them know if you object. In some cases, the person you speak to may have authority to give you a better deal. Also, keep checking the credit card watchdog sites, which include: www.consumerreports.org and www.CreditCards.com.

Goodbye to fixed-rates?

>> The interest rate on your card may still be fixed, but three big card issuers—Bank of America, Chase, and Discover—have switched many of their customers to variable rates. At Chase and Discover, customers can opt out of the changes by paying off their interest-bearing accounts. Not so at Bank of America, which requires customers with open accounts to pay variable rates. The danger? With fixed rates, banks have to notify customers if they want to change the rate. Variable rate accounts have no such requirement. You won’t know about the change unless and until you examine your statement.

Self-defense: Call your credit card issuer to see what they intend to do.
If they plan to switch you to variable rates—or have already done so—consider changing cards. Check one of the sites mentioned at the end of the next article.

Inside the new credit card law

The first thing to understand about the new credit card law is that it will not take effect for nine months. Which means credit card issuers have nine months to continue some highly questionable practices (see below).

The second key point is that there will be no cap on interest rates, even after the new law takes effect. Companies are free to charge any interest rate they like on unpaid balances, a fact that may lead to higher interest rates for people with good credit.

But the law does provide some important protections for credit card users:

All that may sound good, but before you start applauding, realize that card issuers aren’t going to take this lying down. Instead, they will try to make up for the lost revenue by other means, which will almost certainly include higher interest rates, skimpier rewards, and establishing or raising annual fees for all cardholders, including those who pay on time. Again, it will be nine months before card issuers have to comply with the new law. In the meantime, the old problems may continue:

Consumers are paying high interest rates--about 13 percent for non-reward cards and about 15 percent for reward cards, although some rates run as high as 19.99 percent. Imminent Threat: Your credit card company will still be free to jack up your rate overnight, even if you’ve never missed a payment. Many consumers have seen their rates shoot up from the mid-teens to the mid twenties. And if you miss a payment, heaven help you. Your rate may balloon to over 30%.

Self-defense: Don’t even think about being passive. Call your credit card company to check rates, fees, and reasons. Start by asking for a lower rate. Believe it or not, that often works, and it could save you hundreds of dollars a year. Also, be sure to check credit card sites for the latest news and offers: www.consumerreports.org, www.CreditCards.com, www.indexcreditcards.com, www.billshrink.com, and www.Bankrate.com.

Other kinds of punishment

>> You may feel it’s fair for a credit card company to raise your rate because you’re late in paying them. Money has a time value. But credit card companies have other reasons—and other forms of punishment—you may feel are not so fair. For the next nine months, credit card issuers have other ways to torment you:

Self-defense: Don’t let things slide. Find out what you credit card company intends to do (or has done). And don’t let disputed bills go to a collection agency. Work something out. Give the credit card company good reasons to change their mind about you or about a transaction. Starting a reasonable dialogue often helps--not always, but often enough to make the effort worthwhile. Check www.allaboutcredit.net.

What the new law forbids--and allows

 

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