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New strategies of credit card companies hinder the making of fair credit cards

[Tuesday, November 16th, 2010]

In pursuit to make the credit industry fair to consumers, the Obama administration created CARD Act that made credit terms more transparent and comprehensible for consumers.

Part of the act mandates credit card providers to take a 45-day early noticed to inform consumers to whatever changes will be made under consumers’ accounts. Moreover the law made grace period for consumers longer which is now 21 days as opposed to the previous 14-day extension period.

CARD Act also has placed some restrictions for credit card providers when it comes to their interest rates. When providers can make interest rates higher is now dependent on what the law states. In addition to this the universal default plus the double cycle billing were banned by this act.

Furthermore this act has put some restrictions to credit cards owned by young people.

To make the credit industry more customer friendly some fees are prohibited by CARD Act like the fees for inactive gift cards unless the dormancy is in a year period. Talking about gift cards, the law also mandated credit card providers to prolong the life of such cards including gift certificates to five years. These are just some of the changes made by the CARD Act and whoever takes any violation will be fined up to $5,000.

Whilst the government’s effort to help consumer escape from some abusive fees from their credit cards providers, consumers can still experience more problems with their credit card lines today. According to the report provided by the Center for Responsible Lending credit card companies have found ways on how to make new profits in response to the limitations posted by CARD Act. Today there are new charges “invented” moreover the way on how fees are calculated were altered to make consumers pay more.

According to the Center for Responsible Lending Card holders carrying variable rate card are the ones who can be in trouble today. Given that the interest rate of variable-rate type of cards is calculated by including some fixed percentage to an index rate such as prime rate, credit card companies now make use of the highest prime rate in the past 90-day cycle. By doing so card holders’ interest rates will not be reduced despite prime rate declining. According to the Center for Responsible Lending this trick of credit card companies will cost consumers $720 million annually. This is just one of credit card companies’ creative and highly discreet ways on how they can make more money despite of the law’s new restrictions. Maybe today, even for the government the road to get fair credit cards is still under construction.

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