Credit CARD Act: What You Should Know

The credit card reform bill, Credit CARD Act, gets under way February 22, 2010. This legislation is designed to help consumers but like any other bill there are loopholes big banks will jump through to make sure their pockets are nicely lined with your greenbacks.

Here we go loop de loo.

No cap on interest rates. NO…CAP. Credit card companies cannot hike the rates on existing balances unless you are 60 days late on your payment, but they can raise rates on future purchases whenever they feel like it- justified or not. No worries though, you are sure to be advised of such changes to your policy. Unfortunately the advisement will come in the mail smudged in between and looking like junk mail in hopes you toss it out like another useless offer. If you do happen to open it have a magnifying glass handy. Just because they have to put it in writing does not mean they have to make the writing at a readable font size.

This notice is required to be sent within 45 days of the change. Lenders can instill the new rate within 2 weeks after the notice has been sent. You have options sure. Pay the new finance charges, pay your account in full every billing cycle, or stop using the credit card all together. Choices, but choices few in this current economic state are really able to amend to.

The CARD Act has thankfully stepped in and helped Joe Public by placing limits on the severity of penalty fees you can be charged. New fees however, can be created at any time with whatever charges they choose to implement. So lenders can sit around the table and make up new rules and what they justify areâ€"applicable- fees to coincide.

How would you like a new annual fee for your account? How about being charged for the paper and ink to generate your statement that comes in the mail without the option of online billing? Have a card in the dresser for emergencies only? Inactivity fee, there ya go. A fee for not using your card.

Backing up the bus a bit, and right over the consumer mind you, card companies are allowed to raise existing fees. Balance transfers, purchases, cash advances, you name it. The only ones who are safe from this are those with fixed rates versus variable rates. This is a very small fraction of credit card holders and they are usually able to maintain a fixed rated because of a promotional plan or a consolidation plan with a third party non-profit. You MAY have HAD a fixed rate but recently many credit card issuers are switching that over to variable rates to do just this- raise fees on existing balances. You were probably mailed something about it, it just was presented as unimportant like junk mail and discarded.

Wait wait wait, it gets better. Some changes you do not have to be advised on. A creditor can lower your credit limit or close your account without warning. This silent killer can destroy your credit rating by increasing your outstanding debt amounts against your available credit limits. And then guess what? When your credit score goes down your next financial endeavor will be at a higher interest rate as you are now a liability in the lenders eye.

While the Credit CARD Act seems like a fine and dandy helping hand to consumers rest assured any Act that deals with big banks is not going to leave them in the cold so you can feel all warm and fuzzy. What options are there then? Stop using credit cards. A non-profit consolidation company will close your credit cards and reduce the interest rates and finance charges to lower, FIXED rates, rates that cannot be increased with this new Credit CARD Act. If you are ready and willing to close your accounts and not start this very viscous cycle coming consolidate and start improving your credit while paying your balances down faster at lower fixed rates.