Monday, September 13, 2010
The Credit CARD act (the Credit Card Accountability, Responsibility and Disclosure Act) was designed to give a measure of protection to credit card holders by regulating, amongst other things, interest rates, fees and statements. But because credit card companies relied on these now-prohibited practices for a chunk of their profits, it didn’t take long for them to roll out a bunch of new fees meant to recapture some of that lost money. As a credit card holder, your best defense is to educate yourself so you’re not taken by surprise when you get your statement. Be on the lookout for these new charges:
The CARD rules include a “safe harbor” fee protection, meaning that your first violation will likely cost you a $25 fee, and the second bumps up to $35 if it happens in the next six billing cycles. But be warned: issuers can still charge more if they can justify a higher amount, which isn’t easy for them to do, but it’s legal.
These now can’t be triggered on weekends or holidays when there’s no mail delivery, but your credit card issuer may try to circumvent this if they accept payments seven days a week and you pay on a Monday instead of your Sunday due date, in which case they may increase your interest rate and charge a late fee. If this happens to you, call them and ask for the changes to be reversed.
Processing fees/annual fees:
You may now be charged an annual fee on a card that didn’t carry one when you signed up for it. Another new trick: processing fees on new accounts, which are technically allowed because they’re charged before the account is opened
Raising APRs is now more difficult, but minimum payment increases are allowed, and card issuers can still increase your interest rates on existing balances if you’re at least 60 days late with your payment. The fix: Always pay on time.
You may have received an offer in the mail recently for a rebate card. These cards may look like a good deal initially — many offer refunds on finance fees, for example — but they’re not covered under the CARD act, and the terms can be changed as the issuer sees fit, so your best bet may be to skip these altogether.
Business cards, Professional cards
These are not covered by the CARD act, so credit card companies are spreading a wide net to catch sole proprietors and independent contractors. The barrier to entry is not high with these cards — you often just need a federal tax ID number — and the application is still based on your personal credit rating.
Balance transfer, foreign transaction (which may be assessed if you simply buy something online from a overseas retailer), and cash advance fees. Many borrowers have increased those rates a fair amount, so it pays — as always — to read the fine print.