Friday, December 04, 2009
Val J. Peter
We just finished a seven chapter book entitled “How Does a Christian Profit from Tough Economic Times.”
Now let’s look at the reforms and how they are getting along. The first one we will look at in this report is the credit card industry. As you recall, credit card issuers encouraged all of us Americans to spend more and more and more, put it all on our credit cards and then pay the minimum balance. With the economic collapse of 2008 and 2009, a new sense of thrift of frugality and industry is beginning to take hold in America. Congress looked at the credit card industry’s abuse practices and passed recently The Credit Card Accountability, Responsibility & Disclosure Act of 2009, covering so much. The first part of the act went into effect in August and the second part will be in January of 2010.
What is interesting to see and sad to report is that credit card issuers have already figured out how to get around the new rules. Let us look at four ways they do this.
1. The new law says that issuers cannot raise the rates without 40 days notice. But, of course, there is a loophole. The rates don’t apply to variable rate cards (rates that float up and down).
So guess what? Credit card companies are moving more consumers into these cards whose rates will likely soar. It is estimated that variable rates cards will account for 75% of all cards in 2009 up from 65% in 2008. A September 2009 issue of BusinessWeek gave an example of a man in San Jose who was changed to a variable rate card and Barclaycards zoomed his rate to 26.99% from about 16%. He could have cancelled the account, but he was laid off from his job and depends on it. The man feels he’s being ripped off.
2. Starting in February, lenders won’t be able to charge consumers a penalty when they go over their credit limit.
But to make up for the lost revenue, there are new penalties being assessed. Some banks are assessing a level of $19 if a borrower doesn’t use the card for 12 months.
3. Citigroup and J.P. Morgan Chase now have special annual fees that target customers who pay off their balance and, therefore, don’t pay any interest. They are called “dead beats.”
4. Credit card companies are also imposing foreign transaction fees applied to all purchases made at companies outside the United States, even if they are purchased in dollars and not foreign currency.
5. Consumer advocates think that the issuers will dodge marketing guidelines, clamping down on selling cards to young adults. The rules prohibit issuers from giving out freebies to students on or near campus. But some issuers may set up shop a few blocks from school. Others may hit up parents in the hope of signing up their kids.
Be careful! Be careful! Be careful!
We just finished a seven chapter book entitled “How Does a Christian Profit from Tough Economic Times.”
Now let’s look at the reforms and how they are getting along. The first one we will look at in this report is the credit card industry. As you recall, credit card issuers encouraged all of us Americans to spend more and more and more, put it all on our credit cards and then pay the minimum balance. With the economic collapse of 2008 and 2009, a new sense of thrift of frugality and industry is beginning to take hold in America. Congress looked at the credit card industry’s abuse practices and passed recently The Credit Card Accountability, Responsibility & Disclosure Act of 2009, covering so much. The first part of the act went into effect in August and the second part will be in January of 2010.
What is interesting to see and sad to report is that credit card issuers have already figured out how to get around the new rules. Let us look at four ways they do this.
1. The new law says that issuers cannot raise the rates without 40 days notice. But, of course, there is a loophole. The rates don’t apply to variable rate cards (rates that float up and down).
So guess what? Credit card companies are moving more consumers into these cards whose rates will likely soar. It is estimated that variable rates cards will account for 75% of all cards in 2009 up from 65% in 2008. A September 2009 issue of BusinessWeek gave an example of a man in San Jose who was changed to a variable rate card and Barclaycards zoomed his rate to 26.99% from about 16%. He could have cancelled the account, but he was laid off from his job and depends on it. The man feels he’s being ripped off.
2. Starting in February, lenders won’t be able to charge consumers a penalty when they go over their credit limit.
But to make up for the lost revenue, there are new penalties being assessed. Some banks are assessing a level of $19 if a borrower doesn’t use the card for 12 months.
3. Citigroup and J.P. Morgan Chase now have special annual fees that target customers who pay off their balance and, therefore, don’t pay any interest. They are called “dead beats.”
4. Credit card companies are also imposing foreign transaction fees applied to all purchases made at companies outside the United States, even if they are purchased in dollars and not foreign currency.
5. Consumer advocates think that the issuers will dodge marketing guidelines, clamping down on selling cards to young adults. The rules prohibit issuers from giving out freebies to students on or near campus. But some issuers may set up shop a few blocks from school. Others may hit up parents in the hope of signing up their kids.
Be careful! Be careful! Be careful!
posted by Fr. Peter | 10:02 AM
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