The new regulations of the Credit Card Act of 2009 went into effect on February 22, 2010. Many of the new regulations will have a positive effect on consumers as credit card issuers will now have to conform to stiffer regulations regarding such things as raising interest rates on existing balances, changing payment due dates and other questionable practices. However, consumers need still be wary because credit card company profits are down due to the lingering recession that has more people using cash than plastic along with the new regulations.
Right now the credit card companies are implementing some new creative measures to protect their profits. Unsuspecting consumers need to be wary of newfangled, additional fees that may be tacked onto their credit card bill.
Annual fees are being implemented on many existing credit card accounts. Previously, annual fees were reserved for high-end reward cards and the majority of consumer credit cards did not have an annual fee. Annual fees are detrimental to the consumer because they significantly add to the cost of using credit cards, regardless of how much or how often you charge. If your credit card has been hit with an annual fee, you have the option to apply for a new card without a fee and canceling the old account, however, a consumer who takes that option will suffer a short-term hit to their credit score.
Under the new regulations, the credit card issuers must notify the consumer of any changes to the credit card at least 45 days in advance. Consumers need to be aware of how important it is to read all correspondence from the credit card companies as the notifications could be bundled in with the monthly statement or mailed in an envelope that resembles a solicitation or is inconspicuous and easy to disregard. Read all information from your credit card companies very carefully.
Credit card companies are also starting to charge merchants more for the privilege of allowing their customers to use credit cards. These fees are called interchange fees and when the cost of these fees increases, merchants are often forced to raise costs in order to protect their own businesses. Higher interchange fees can lead to higher prices for consumers.
Under the new regulations college students will not be able to get a credit card unless they can prove the ability to pay or have a co-signor. However, the credit card companies are limiting their risk by reserving the option to maintain the co-signor for long after the student turns 21. Co-signors need to be completely aware of the duration and extent of their liability before they sign.
Credit card issuers can no longer raise the rates on existing balances however, many raised rates previous to the regulations taking effect and offered consumers interest rate rebates for paying on time or making a certain amount of new charges every month. These interest rate rebates are an artificial savings and smart consumers will avoid these tricks by paying off the balance every month.
The new regulations are beneficial to consumers because they are offering protection from many of the credit card pitfalls of the past, however, the credit card companies are in the business to make a profit and they will continue to come up with new strategies that will cost the consumer more because they need to protect their profits.
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