Posted on Thursday, 12th August 2010 by Heather Powell

Need To Know List: 5 Credit Card Changes & 5 Credit Card Warnings

Disgruntled credit cardholders have long been grumbling about ridiculous $39 late fees and arbitrary interest rate hikes. But before you go ballistic on your credit card issuer in a way even Steven Slater could be proud of, it might bring some peace of mind to know the final stage of the CARD Act just kicked in to ease harsh credit card penalties and issuer abuses.

Know the following changes to save some money and maybe your sanity too.

  1. Late Payments. No more late fees as high as $39. Issuers can’t charge more than $25 for a first-time late payment. If you are late again within 6 months, issuers can charge up to $35. But if you pay on time for the next 6 months, the late penalty lowers to $25 again. In addition, late payments cannot exceed the minimum amount due, so if you are late on a $20 minimum payment , your late fee is also capped at $20.
  2. Inactivity fees. Banned!
  3. One fee rule. Issuers can only impose one free per transaction; for example, issuers can no longer charge a late fee in addition to an over-the-limit fee.
  4. Interest rate. If an issuer increases your interest rate, they must re-evaluate the increase six months later. For example, if your interest rate was hiked up due to late payments, after 6 months of on-time payment history issuers should consider adjusting your rate. At the very least, issuers must explain why your interest rate went up.
  5. Gift cards. Gift cards issued after August 22 this year can’t expire for at least 5 years after the card was issued or funds were last loaded. Also, dormancy fees can only kick-in if the card goes unused for a year.

On the other hand, issuers’ response to credit industry reforms may end up costing consumers. Know how this can directly impact you to help you avoid headaches from consumer-unfriendly policies.

  1. Steeper credit score requirements. Issuers are less willing to take a risk on poor credit customers who could cost them money, so getting approved for a credit card may require better credit scores.
  2. Higher interest rates. Watch out, issuers are raising rates on even good credit customers. While a provision in the CARD Act mandates that issuers give you 45 days notice on interest rate changes, it did not put a cap on interest rates.
  3. 5% Balance Transfers. There was a time when 3% fee on balance transfers was the standard rate. Be weary, as 5% is now the norm and discreetly added to attractive 0% APR teaser rates on purchases and balance transfers.
  4. Annual Fees. You may see many more cards toting annual fees on the market. It’s a big way issuers can recoup losses.
  5. Rewards Cards. What the issuers giveth, they’re more than happy to taketh away, reports the Huffington Post. Check out all the ways your credit card rewards might be shrinking or disappearing altogether in Is Your Credit Card Company Cheating You Out of Rewards?

Bottomline: Final reforms of the CARD Act benefit consumers, especially in regulating late fees, but consumers must remain vigilant of upcoming, unintended consequences of more fees or stricter credit requirements.

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Tags: Card Warnings, Credit Card, Credit Card Warnings, Warnings
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