Credit Card Reform Act Lunacy (more nonsensical governmental meddling)

[ponycar17]

My wife started telling me about some of the potential changes that could be coming from major credit card providers since she works in the financial industry. She was mentioning the fact that the credit card companies are taking a major hit in revenue since they can no longer charge multiple overdraft fees per laps in user judgement/responsibility, and that some card companies are going back to annual fees. Here's an article I found.

Credit Card Reform Act Goes Into Effect
From interest rates to transferring balances, what do you need to know when it comes to the credit card reform act?
Posted: 9:29 PM Feb 21, 2010
Reporter: Marybeth Brush
Email Address: mbrush@kktv.com

After months of waiting the new credit card reform act took effect Monday. The new Credit Card Reform Act is designed to protect consumers from rate hikes and expensive fees.

And here's the good news, among the new card rules: Interest rates can't be raised on existing balances or on accounts that are less than a year old.

Some more good news, when you open a new account, credit card companies can't increase your rate for the first twelve months, unless you have a variable rate card, are more than 60 days late paying your bill, or work out a special agreement with your card company and then fail to live up to it. But on the downside, a financial expert points out a potential problem, an offer called overlimit protection. "If you don't sign up for overlimit, you can't be charged that $35.00 overlimit fee, so just ignore that offer, say no thanks to it and don't sign up for overlimit," says Gail Hillebrand with Consumer Reports.

Hillebrand says beware of low, introductory rates and offers to transfer balances from one card to another. It doesn't protect you there. "The purpose of promotional rates is to get you in the door and have you charge it out before you realize how much it's really going to cost you," says Hillebrand.

The new law also bans companies from issuing cards to people under 21-years-old, unless they have an adult to co-sign.

Another highlight, credit card companies must now give you 45 days notice before they can increase your interest rate, start charging you new fees, or make other big changes that affect the terms of your card, unless you have a variable rate card. "It used to be -- let's say you slip up and you're a day late on a payment. The credit card companies would triple your interest rate and apply it to your entire, existing balance. That -- they can't do anymore," says Tamara Draut, Vice President of Policy and Programs for DEMOS.

Credit card company moves that could impact you:

Annual fees, common until about ten years ago, have made a comeback. During the final three months of last year, 43 percent of new offers for credit cards contained annual fees, versus 25 percent in the same period a year earlier, according to Mintel International, which tracks marketing data. Several banks also added these fees to existing accounts.

Companies have also created new fees and raised old ones. These include a one-dollar processing fee for paper statements for cards issued by stores such as Victoria's Secret and Ann Taylor. Another example is a $19 inactivity fee Fifth Third Bank now charges customers who haven't used their card for six months. Other banks increased existing fees. JPMorgan Chase, for instance raised the cost of balance transfers from one card to another to five percent of the transfer, up from three percent.

Some companies are also raising interest rates. The average rate offered for a new card climbed to 13.6 percent last week, from 10.7 percent during the same week a year ago - meaning cardholders had to pay almost 30 percent more in interest, according to Bankrate.com.

Emphasis added by me...

From http://www.kktv.com/home/headlines/84929682.html

Did you catch that one action? If you're successfully paying off your balances and being a responsible consumer one bank has now decided that you must be assessed a $19 fee. I am under the impression that this will mean that if you have a $0 balance you will be assessed a $19 fee for inactivity because it costs money to maintain the account. Forget to pay that $19 because you don't have a balance and watch the interest and fees start mounting even if you're not using the card. This will catch most consumers off guard, and is the most glaring problem the good old feds just created. Gone are the days of having an account that you don't use just for security; it'll cost you now.

The White House suggests that the card-issuing industry makes $15B annually on penalty fees. You know, the fees accrued by those who have either had a lapse in judgment or behave totally financially irresponsible. This act did nothing to punish the banks, since the financial industry always reacts to maintain their profits. Look at what banks did with the sub-prime mortgage market. They were told, "Look, you need to loan to people who can't afford the mortgages they're issued." In response, the banks created the mortgage-derived securities market that protected lending profits in the short term but later ravaged the world economy in 2008 when the market collapsed. Government intervention that tries to usurp basic economic principles ALWAYS produces results which are WORSE than the previous state.

So, what does this all mean for the banks' revenue? Very little in the long run... Why? All of the responsible consumers will be paying for the mistakes of those who couldn't manage their accounts responsibly. Let's score another win for the good ol' US Government and their economically inept reaction to non-problems...

Just thought you should know....

[ponycar17]

Basically, if you carry a card that you don't use (or do use) review your statements and terms of use carefully. You could end up in trouble and this really won't be your fault. Blame it on those who couldn't manage their finances for calling in the Superheroes of 'Ekuhnawmics' from DC.

[pinecone70]

Fantastic, more dumbing down. Now they start punishing me for being a responsible card carrier for twenty plus years? One time I missed paying the monthly balance in full, ever. I think I'll cut them up, maybe find one that is the least painful and keep it. After all, credit cards are required for some things.....Bah.

[dbrodin]

Non-use of a credit card shows as a negative factor on your credit score. Same with paying the balance in full every month. This is considered bad behavior because they don't make any money off you.

[ponycar17]

dbrodin, that's partially true. What the FICO score takes into consideration is your total available credit compared to what you owe, along with how responsible you are with making payments. If you have a mortgage and a car payment but two open credit cards with zero balances that isn't going to hurt your score. Now, closing one of those two cards WILL hurt your score as your percentage utilization of open credit lines will increase. In other words, your available credit will have suddenly decreased but your total amount owed will remain the same. So, it used to be that if you could keep an unused card open it made sense to do so because closing it would hurt your credit. Now, with the reemergence of annual fees it may make more sense to bite the FICO bullet and close the card. If someone has no other debt and they close their credit cards, then their FICO score will go to the crapper. Now, that's not a totally bad thing either if you don't need access to credit.

[pinecone70]

I'm sure I have wrecked everything for myself by having no loans or debt. It's not the American Dream.

I was taught that a credit card is essentially a one month loan.

[todd51]

Do any of you know what the facts are on charges to vendors where I have made a purchase using my card. I was under the impression that the vendor (Home Depot, Kroger's, Walmart, etc.) had to pay the card issuer (Visa, Master Card, Discover, etc) a percentage fee (2%-3%) on the amount of the purchase I made. Therefore giving a profit to the card issuer even though I paid the account in full each month. When I have given a vendor the option of payment especially small independent vendors have always chosen a personal check over a credit card method of payment saying to me it cost them if I used the card. I was under the impression that this is why so many of the large vendors want to issue you their card rather than have you use one of the universal cards. Is any of this close to the truth?

[Bobitis]

At least we can carry in parks now.

I too have one card only. I got a card from Sears about a month ago. In the mail! All ready to go. I haven't bought anything from them in 20+ years.
My son gets more card offers than I do, and he doesn't even work.

My credit score is 760+, but I can't get a loan for him to go to school.
The fed has several programs available, but for some reason I don't qualify as a co-signer. It must be that 'risk' factor.

No risk, no loan.

And Todd, you are correct. Every time we process a card where I work, we get dinged for it.
It's the lenders way of saying thanks.

[bcj1755]

Gee, now I'm really glad I never got a credit card, and at this rate, I'll never get one. Thanks a bunch, Barry

[armedandsafe]

The only time I've been involved with a credit card was the one the CC company sent to my (ex) wife, to an address of her co-worker. Co-worker suddenly had bunches of money to blow. Took awhile and a plane trip to Anchorage to get that one straightened out.

I have no idea what my credit score is, as they won't send me my federally mandated free report. Something about never having had any credit. hmmmmmm

Pops

[Gun Geezer]

A banker type told me once that the only reason credit card companies retain those who pay the monthly balance in full is the hope that just once the card holder will over-spend and not be able to pay the balance, then they got you. Even though they lose money on the card holder who pays the monthly balance, they make it up on the 3 or 4 per-cent they charge the business for accepting the card. Even when they lose they win.

[pinecone70]

I bet the vast majority of Americans carry a balance on all their credit cards, especially now.

[ponycar17]

Keep in mind too that this isn't only about credit cards.

Debit cards are also affected by this legislation. Do you enjoy a free debit card now? I have for many years. Debit cards used to require a monthly fee for their use. That too will likely return as banks (and credit unions) are only allowed to charge a one-time overdraft fee if someone goes on a spending binge and purchases 5 items over their limit. Some people don't care how much is available in their account - they'll work that out later. That's a tremendous loss in income to the financial institutions and THEY WILL recoup the losses. It's only a question of how quickly the reactions will be implemented.

Since banks and credit unions are hurt by decreasing revenue that will lower interest paid on investment products, raise maintenance fees for check copies, talking to a live teller, online banking, interest on mortgage and auto loan products and the list goes on... Again, responsible patrons will pay the price.

Thanks to all the financially-inept people in DC who have given us this gift.

[ponycar17]

And yes, the right to carry in national parks is the only thing I see positive about this bill. It really scares me though, that Obama (and anti-gun zealot) would sign a bill concerning credit card reform with a pro-gun rider attached. What is there about this 'reform' bill that's going to be so important that it was worth allowing pro-gun legislation to pass through? The real reaming may be on the horizon.

[ponycar17]

So I had to revisit this topic. I said that financial institutions WOULD make up for their losses because of this bill. Here's the most obvious example to emerge...

Bank of America $5 Debit Fee Protest Gains Steam

And these people protesting?... That's just crazy. Let them take matters into their own hands and leave BOA. It's stupid to protest it.

[CampingJosh]

Originally Posted by ponycar17

So I had to revisit this topic. I said that financial institutions WOULD make up for their losses because of this bill. Here's the most obvious example to emerge...

Bank of America $5 Debit Fee Protest Gains Steam

And these people protesting?... That's just crazy. Let them take matters into their own hands and leave BOA. It's stupid to protest it.

Truly ridiculous. You have a choice of banks!

I've never used BOA, but I have had accounts with Chase and National City/PNC. National banks have the worst customer service of any company in any industry. I will never go back.

[ponycar17]

Originally Posted by CampingJosh

Truly ridiculous. You have a choice of banks!

I've never used BOA, but I have had accounts with Chase and National City/PNC. National banks have the worst customer service of any company in any industry. I will never go back.

Agreed! I ditched commercial banks for credit unions over 10 years ago and haven't looked back.

[carver]

I'm not up on the credit card thing, I haven't had one in a very long time. I have two bills that are loans, the car, and the house. My credit rating is in the tank, because I have none! I do know that vendors do have to pay a fee to get paid thru credit card companies, we used to run a small business. If you own a credit card, weather you use it or not, the banking ind. will get you sooner, or later. If you don't own a credit card, and owe no money, they will still get you, sooner, or later! If they start charging you a fee to use your debit card, you could always have your money sent to your house, but then they would start charging you for cashing the checks. Got ya either way!

[yuri]

It is really important today that you know how to manage your financial assets. Most people today are having hard time to live because of the financial crisis that we have. That is why most of us today probably have a payday loan to pay.

Are you a coupon fiend who hopes to leave the scissors behind? Linkable Networks and 24/7 Real Media have something you may want to try. It does not even demand a smartphone. Bankrate reports that a new program called Linkables embeds coupon savings directly onto a consumer's debit or charge card. I read this here: Linkables: Digital coupons embedded in your debit or credit card

[jack404]

whats a credit card ?

[HunterAlpha1]

Originally Posted by jack404

whats a credit card ?

believe me jack, you don't want to know

[jack404]

actually i do know only too well , my lovely bride was a sucker for them and put us in a heck of a spot with hers for a while .. i cut it up and cancelled it , when the bank sent a replacement after i canceled it i took it back and asked which end of their person they'd prefer i put the next one ( if they sent another as was there practise here back then ) , as i was in uniform and had a side arm i think they took it seriously and we've never had one since ( 1983-4 ?)

they where sending $5000 limit cards to 9 year olds who's parents started savings accounts for the kid ...

[raven818]

Originally Posted by armedandsafe

The only time I've been involved with a credit card was the one the CC company sent to my (ex) wife, to an address of her co-worker. Co-worker suddenly had bunches of money to blow. Took awhile and a plane trip to Anchorage to get that one straightened out.

I have no idea what my credit score is, as they won't send me my federally mandated free report. Something about never having had any credit. hmmmmmmPops

Go here, it's a government site. http://tinyurl.com/67s87o

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months.

Stay away from other sites offering free reports, like freecreditreports. com. Firefox won't let it's users into the site.