President Obama Tackles Credit Card Reform
Credit card customers should pay attention to news from the White House on Thursday when President Obama and senior administration members host credit card executives to encourage regulation, reform, and rate relief for cardholders.
Credit card reform has been a hot topic during the past year. The Federal Reserve passed regulations that would benefit cardholders but these changes don't take effect until July 2010. There are currently credit card reform bills working their way through both the House and the Senate.
Despite the political and public outcry against certain practices by issuers, most of the changes issuers have made are ones that increase their revenue, making the situation for cardholders even more difficult.
"Credit card issuers have not only ignored the pressure for change, they have responded with increases in both interest rates and fees. It will be interesting to see how they respond to Presidential persuasion," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
Here are some of the recent changes in credit card rates and fees:
Straight rate increase
* CapitalOne increased interest rates to new customers on 15 cards in February. For example: the Platinum Prestige card increased from an APR of 7.15% to 11.9%; the No Hassle Miles Rewards card from 8.15% to 13.9%
Rate increases for segments of customers
* In June, Bank of America will increase interest rates up to the "low to mid-teens" for cardholders who carry a large balance with a current APR that is less than 10%.
* Discover has also notified a segment of customers of a rate increase in June.
Foreign transaction fees
* Starting May 1, Discover will charge a 2% foreign transaction fee.
* Several issuers (Bank of America, Citi, Simmons) will begin charging a 3% fee for all transactions made outside the US in US dollars. Previously, the fee was not added when foreign transactions were made in US dollars.
Fee increase for balance transfers
* In June, Bank of America will increase its fee for balance transfers from 3% to 4%. This increase will also apply to cash advances and ATM advances.
* Discover will also increase its balance transfer rate from 3% to 4%.
Change in terms
* In January, Chase added a $10 monthly fee and increased the minimum payment from 2% to 5% for those who have carried a large balance for over two years and have made little impact in what they paid off. The monthly fee was rescinded in March after substantial outcry from Chase customers.
"These published changes do not take into account the tremendous number of customers who have had their individual interest rate increased. In today's environment, if customers do anything that show they are a greater risk, they are extremely likely to see their interest rate increased and/or their credit limit decreased very quickly, maybe the next month," says Hardekopf. "This increased risk could come from missing a payment, being late on a payment, exceeding your credit limit or perhaps using too much of your credit limit. To minimize the chances of getting hit with a credit card rate increase, consumers need to make sure they pay all their bills on time, pay more than the minimum amount and not use more than one-third of their
available credit."
Credit card reform has been a hot topic during the past year. The Federal Reserve passed regulations that would benefit cardholders but these changes don't take effect until July 2010. There are currently credit card reform bills working their way through both the House and the Senate.
Despite the political and public outcry against certain practices by issuers, most of the changes issuers have made are ones that increase their revenue, making the situation for cardholders even more difficult.
"Credit card issuers have not only ignored the pressure for change, they have responded with increases in both interest rates and fees. It will be interesting to see how they respond to Presidential persuasion," says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.
Here are some of the recent changes in credit card rates and fees:
Straight rate increase
* CapitalOne increased interest rates to new customers on 15 cards in February. For example: the Platinum Prestige card increased from an APR of 7.15% to 11.9%; the No Hassle Miles Rewards card from 8.15% to 13.9%
Rate increases for segments of customers
* In June, Bank of America will increase interest rates up to the "low to mid-teens" for cardholders who carry a large balance with a current APR that is less than 10%.
* Discover has also notified a segment of customers of a rate increase in June.
Foreign transaction fees
* Starting May 1, Discover will charge a 2% foreign transaction fee.
* Several issuers (Bank of America, Citi, Simmons) will begin charging a 3% fee for all transactions made outside the US in US dollars. Previously, the fee was not added when foreign transactions were made in US dollars.
Fee increase for balance transfers
* In June, Bank of America will increase its fee for balance transfers from 3% to 4%. This increase will also apply to cash advances and ATM advances.
* Discover will also increase its balance transfer rate from 3% to 4%.
Change in terms
* In January, Chase added a $10 monthly fee and increased the minimum payment from 2% to 5% for those who have carried a large balance for over two years and have made little impact in what they paid off. The monthly fee was rescinded in March after substantial outcry from Chase customers.
"These published changes do not take into account the tremendous number of customers who have had their individual interest rate increased. In today's environment, if customers do anything that show they are a greater risk, they are extremely likely to see their interest rate increased and/or their credit limit decreased very quickly, maybe the next month," says Hardekopf. "This increased risk could come from missing a payment, being late on a payment, exceeding your credit limit or perhaps using too much of your credit limit. To minimize the chances of getting hit with a credit card rate increase, consumers need to make sure they pay all their bills on time, pay more than the minimum amount and not use more than one-third of their
available credit."
