Credit Card Bill Passes Senate, Good or Bad?

Yesterday, the Senate overwhelmingly passed a credit card bill of rights.  It puts into law a lot of the regulations that the Federal Reserve passed late last year.  In partciular it will have the following benefits for consumers:

1. The bill requires card companies to lower interest rates for cardholders who have exhibited good behavior and paid on time for six consecutive months.  How this will happen and how much banks have to lower rates though is not in the bill.   

2. Credit card companies must give 45 days' notice before raising the interest rate.

3. Banks must send your bill out no later than 21 days before the due date. 

4. 5 p.m. on the due date is now on time! They can't give you a late fee because the bill arrived at the wrong hour on the due date.

5. No more late fees if due date is a Sunday or a holiday and your payment doesn't arrive until a day later.

6. The banks must now apply extra payments to the highest rate on your account if you have multiple rates, not on the lowest as they often do.

7. Banks must now ask you if you want to go over your credit limit and incur a penalty fee for doing it.

This bill is very similiar to a set of credit card regulations passed by the Fed earlier this year that was intended to protect consumers.  Many believed in the provisions so strongly though, that they felt the regulations needed to be made into law.  Once the House and Senate agree on a final version, it will be sent to President Obama, who says he will sign it.

So is this good?  Many say that it is another way in which the government is mucking with the free market.  But is that really the case?  Some credit card companies have been profiting through trickery and gimmicks.  As we've seen, many consumers with good credit, who were assured one rate suddenly saw the rate change for no apparant reason.  That's not right.  Will this reduce credit availability?  Maybe.  And maybe that's not a bad thing. Clearly, many peope were given more credit than they needed or could afford.  Not providing the credit is better than giving too much and then bankrupting those individuals with interest rates boosts, late penalities, and other issues.

The bill if anything is just another example of how the easy, anything goes lending environment of the last ten years has come to an end. 

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

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Credit Card Fees: Credit Card Industry Aims to Profit from Sterling Payers

I use my credit cards responsibly and pay off my balance each month. I am not enthusiastic about the plans of the card companies to go after me in order to make up for their losses on others.

Credit card companies have clearly extended extraordinary amounts of credit to American households that cannot make payment and have extracted large fees and interest penalties from those who cannot make payment. The US Congress is putting in a plan to protect those of have taken out too much debt that will protect many of these people and cut revenue streams for the card issuers.

According to this article in the New York Times, these companies now have a plan to make up for this shortfall by going after those cardmembers who pay on time and have excellent credit.  Their plans include reviving annual fees, curtailing cash back and other reward programs and charging interest immediately upon a purchase.

I, for one, always pay my credit card balances on time.  Over the years, I have earned large sums of airline miles and other loyalty points through using my credit cards.   Aside from this incentive, I use my credit cards primarily as a method of convenience.  Recently, I was two days late on a American Express payment for which they insisted on charging me a late fee (they claim that they had made a 1-time exemption for me in 1997) and moved into "revolver" status on a Visa cad when I questioned a charge (Visa insisted on charging me $16 and a representative called me a "deadbeat").  I have little tolerance for this type of treatment, but I've continued to use the cards.  If the issuers however take further steps towards charging people like me for the mistakes of others, I will start to go back to cash.

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

Advertising Disclosure: This site may be compensated for hosting offers.


I Gave the Banks a Chance and Then Cut Up My Credit Card

I had about $7,000 in credit card debt that I'd accumulated over the last couple of years. I called the bank to see about lowering my rate and at the same time set up my bill payment to pay it off. I then asked them to lower the rate. If they said no, I was going to press the button and pay off the balance.

I had about $7,000 in credit card debt that I'd accumulated over the last couple of years.  I called the bank to see about lowering my rate and at the same time set up my bill payment to pay it off.  I then asked them to lower the rate.  If they said no, I was going to press the button and pay off the balance.

I'd accumulated the debt because I received several 0% interest offers and took the money and invested it in a high balance CD.  Doing this was like making free money.  When the 0% intro period ended in April, I decided to call the credit card company and see if I could get the interest rate back down.  I've always payed my bill on time and have used less than 50% of the credit limit.  I know my credit is excellent.  I also received a 0% balance transfer offer from the same bank - Chase - just two weeks before.  So if they were willing to offer me 0% to bring in new money, why wouldn't they offer me 0% to keep existing money?

Before I called the company, I opened up my online bill payment and typed in the balance amount.  If they weren't going to lower my rate, I was going to press the 'send' button and pay it all off immediately. 

So, here's what happened...

I called the bank and told them that I wanted to discuss lowering my interest rate.  The rep on the phone asked me to hold.  She then came back on the line and said that the company was not lowering interest rates.  I said I understood and that I was prepared to pay off the entire balance.  She didn't budge.  I said thank you very much, ended the conversation and pressed the send button.

Two days later the $7,000 was removed from my checking account and my credit card balance went to $0.  I then cut up the card, took half the pieces and put them in one trash can, and put the other half in another trash can to prevent anyone from puzzling it back together.

Now how anyone expects the banks to regain their profitability with that type of business decision is beyond me.

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

Advertising Disclosure: This site may be compensated for hosting offers.