Consumers can’t relax with the credit card reform. People need to be wary now a lot more than ever. The credit card reform act of 2009 has looked at a lot more underhanded credit card scams from financial institutions. So now those establishments are trying much harder to sign people up for credit card debt than they ever have. And they’re looking for more interesting and exciting ways to make money with new fees, shorter grace periods and higher late fees. Credit card users need to read the fine print on any and all applications and read statements carefully when they get them.
Credit card offers exploding
Credit card companies can be very hard to control. Even with a horrible economy, the credit card reform act of 2009 has credit card business marketing efforts in overdrive. As documented by Synovate Mail Monitor, which tracks direct-mail offers, credit card spiels to U.S. households increased 29 percent first quarter of 2010. Some of the companies have doubled their efforts. Some of the largest ones are downright predatory within the fees they come up with to charge customers a lot more.
Credit card frauds
There are numerous creative credit card scams. Many say they price late fees for risk. But there has come a new report from the Center for Responsible Lending shows that late fees have nothing to do with the credit card company’s potential loss. The report explained that late fees aren’t pegged to the risk a borrower might default on their credit card debt. Instead, nine of the top 10 characteristics of credit card companies who charge high late fees are deceptive practices. One tactic is imposing a much higher interest rate if a customer pays just a day late. Another tactic is to set the payment deadline for early morning on the due date.
More than just credit card late fees
Credit card late fees are just the beginning. It was reported by USA Today that other tricks to watch out for include balance transfer fees, shorter introductory offer periods, and the fine print about annual fees on rewards cards.
All the new balance-transfer fees: Credit card companies offer percent introductory rates to transfer balances to a new card. But increasingly, they’re charging fees of up to 5% on the amount transferred, with no cap. $ 20,000 could cost you $ 1,000 to transfer.
Shorter initial offers: Some credit card companies offer percent interest for up to 18 months, but a six months is becoming much more common. The credit card reform bill prohibits any of the credit card companies from offering introductory rates for under six months. Card holders must be realistic about whether they can pay off the balance before the offer expires. Any late payments will prompt the company to cancel the introductory rate.
Some Annual fees: A lot more rewards cards are coming with annual fees, especially airline credit cards. Calculations are more complicated with these companies. The fee could be worth the ticket unless it takes you years to get it. It’s very difficult for average leisure travelers to justify the cost of a mileage card. Then there are the rewards cards that withhold rewards because of a late payment and demand a reinstatement fee to reclaim the rewards.
Everything costs a lot more with credit cards
All of these credit card offers are exploding because of the credit card reform act of 2009. But an unhealthy economy and credit card debt are a bad mix. It was reported by Smartmoney.com that when the economy is troubled, the value of goods and services falls relative to the value of money. That situation puts people with a lot of credit card debt between a rock and a hard place. As the price of every little thing falls, so does their value. When a product is charged on a credit card, the ultimate price paid for it rises as the product loses all of its value, and that does not include interest.
Citations
Center for Responsible Lending
responsiblelending.org/credit-cards/research-analysis/a-just-fee-or-just-a-fee.html
USA Today
usatoday.com/money/perfi/columnist/block/2010-06-01-yourmoney01_ST_N.htm
Smartmoney.com
smartmoney.com/Personal-Finance/Debt/carry-credit-card-debt-watch-the-dollar/
