Consumer groups were rejoicing over the passage of the Credit Card Accountability, Responsibility and Disclosure Act of 2010. Better known as the Card Act, this reform bill makes a number of changes to what banks can do.
It limits what banks can charge in late fees and overdraft penalties, compels them to give consumers more time to pay their bill from when they receive their statement, and requires advance notification if the card company wants to hike interest rates, among other things.
Sounds great, huh? Here’s why I’m not a fan.
– I’m a good banking customer, so I don’t pay late fees. I get no benefit from this provision of the Card Act. But limiting banks’ late fees on deadbeat customers means they have to make their money another way. To compensate for not being able to charge you $40 for being late when your minimum payment was $10, many banks are jacking up their interest rates. All consumers will have to pay those higher rates, including responsible credit users like me, instead of the deadbeats paying more and the rest of us paying less, the way it was before. I think it was fairer the other way.
– You’ll get hit applying for a new card. I hope you like the relationship you have with your current credit-card issuers, because if you ever decide to go get a new card, you’ll likely see higher interest rates if you fill out a new card application.
– The Card Act doesn’t apply to business credit cards. So if you have a business card for your company expenses — and you should — you didn’t catch any break here.
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