Credit Card Regulations May Have Unintended Negative Consequences

By Joe Taylor Jr., CardRatings.com Reporter



President Obama Signs Credit Card Act Into Law
As President Obama signed a new Credit Card Bill into law, financial industry analysts debated whether tough, new regulations would return America's consumers to a more responsible era or throw the sector into a tailspin. Major provisions of the new credit card law include:

• Strict limits on marketing to college students and other prospective cardholders under the age of 21.



• Preventing cardholder accounts from being charged beyond their limits, unless cardholders have authorized over-limit activity (and over-limit fees) in advance.
  Clearer disclosure of credit card interest rates and repayment estimates, using standard text sizes and styles.



• Tougher rules related to raising interest rates on delinquent cardholders, with clear paths to rehabilitate credit card accounts.

Consumer advocates hailed the new law as a major step toward decreasing personal debt in the United States. Upon passage by the House, earlier in the week, Consumers Union spokesperson Pamela Banks told reporters, "Consumers got fed up, they spoke out, and Congress approved reforms by an overwhelming margin." However, the news sent financial stocks into a tailspin, as investors grew concerned about the impact on credit card companies' bottom lines when the law takes effect in February 2010. This type of impact is not likely to help alleviate the credit freeze that the industry has been witnessing for quite some time.

Some consumer advocates, however, are concerned about a potential negative backlash for consumers. Although CardRatings.com founder Curtis Arnold thinks that some degree of regulation is definitely needed, he is concerned about the response of the credit card industry. "I definitely think average credit card rates will rise in the next 6-12 months. We are already seeing this, but the legislation will likely accelerate this trend. We may also see new types of fees crop up that we’ve never seen before." said Arnold.



Do you feel these credit card restrictions will positively or negatively affect consumers? Tell how you feel about it in our credit card forum.

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Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Re-thinking Credit Card Choices (Part 2)

By Michael Killian, CardRatings.com Reporter

Editor's Note: This article is the second of a two-part interview with Linda Sherry, the Director of National Priorities at Consumer Action.

Mike: It has been suggested that those with good credit scores will find good credit card deals and those with poor scores will not find cards available at all. Are you finding this true and if so what can folks do to improve their scores?

Linda: I think this is true. People with poor scores should avoid the products that target their demographic with high upfront fees and tiny lines of credit. Instead, look for a good secured card.

The best advice I can give people about improving their scores is pay your bills on time (or even early!), do not use over 40% of your lines of credit (the lower utilization the better), and check your credit report for errors or possible identity theft on a regular basis. Each year, always get free copies of your credit reports (from the 3 major credit bureaus) from AnnualCreditReport.com.

If you are already in default or charged off status on credit accounts, it is going to take super-human efforts and many years to improve your score. Don't go there in the first place.

Mike: What will happen with credit card fees and penalties in this credit crunch?

Linda: We are already seeing increases in rates and new monthly fees for card customers. Until the new Fed rules take effect in July 2010, I think we will continue to see blanket re-pricing for "economic conditions" as well as risk-based repricing on individual accounts.

Mike: Do higher interest, decreased rewards, and fewer offerings seem to be the trends? Do you see other trends?

Linda: One thing we are seeing is a new and "creative" fee such as the Chase monthly fee for people with low promotional rates.

Mike: Are there cards consumers should be looking to?

Linda: Dare I say that any card from the top six banks is pretty much the same as any other? Just make sure that the reason you pick a card has nothing to do with pretty pictures on the front and everything to do with what is in the fine print.

Getting a reward, such as a cash rebate, is useful, especially if paid in full every month. Let's just keep our fingers crossed that the companies don't take back the most robust rewards.

Mike: Do you have any other comments you'd like to make?

Linda: I'd like to see people help us in our efforts to get new laws passed in Congress to protect credit card users. Check out our Take Action Center. Not only do we have specific alerts you can write to your lawmakers about, but also we allow anyone to write anything they want to their lawmakers, local and state officials, and news outlets. All free, but of course, we accept donations if the spirit moves you! You can also sign up for email alerts.

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This article was written by Mike Killian, Founder of Learning Credit and Debt Management. Mike has been writing about credit and debt management issues that are of importance to consumers for over 8 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Re-thinking Credit Card Choices (Part 1)

By Michael Killian, CardRatings.com Reporter

Editor's Note: This article is the first of a two-part interview with Linda Sherry, the Director of National Priorities at Consumer Action.

Exceptional times often require exceptional measures to deal with events. No one doubts or questions the seriousness of our economy. Consumers are cutting spending and shedding debt whenever and wherever possible. The commercial market place is affected by this trend. What does this mean for consumers in return? What credit cards should they be considering? How can consumers pay down their debt?

Linda Sherry, the Director of National Priorities at Consumer Action, was very helpful in answering these and other questions.

Mike: Are you seeing one group of people more affected by the economy downturn than others?

Linda: I think everyone is hurting right now. Many people have retirement accounts and home values that have diminished considerably, all while dealing with tightening consumer credit. People are telling us that their credit limits are being cut, interest rates increased, and some customers with promotional rates are being hit with $120 annual fees unless they accept a higher interest rate. With the layoffs, many people are using credit cards to keep their family finances afloat.

Mike: Some financial advisors have suggested that openly discussing personal credit card debt is highly taboo. Have you found this to be true and could this be a stumbling block to recovery?

Linda: We hear from a lot of people who are burned by credit card companies. But I do notice that many of them aren't prone to mentioning the outstanding balance amounts that they are carrying. I am often shocked when people tell me they are carrying $10K, $20K, and even $30K on credit cards. How did the companies allow people to carry balances of this magnitude? Why would people want to have these balances on their backs?

With balances like these, you have to wonder if it's an addiction. Besides small business owners, who may legitimately use credit cards to build business and help cash flow, it's not hard to imagine that people who have been allowed to run up $30K in credit card debt feel a little shame. In addition, there may be problems of self-esteem, depression, and shop-a-holism that allowed the balances to grow so high. A group like Debtor's Anonymous can be helpful in these cases, if people can face up to the magnitude of the problem.

But personal responsibility goes only so far...the banks have a responsibility not to extend such enormous amounts of credit and not to suddenly change the terms to throw consumers into even a worse place financially with higher interest rates, fees, and punitive terms. Banks need to scrutinize new applicants for unsecured credit more closely. They really need to ensure that there is adequate income to repay unsecured debts.

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This article was written by Mike Killian, Founder of Learning Credit and Debt Management. Mike has been writing about credit and debt management issues that are of importance to consumers for over 8 years. His articles have been referenced by various members of the media, including MSNBC and The Motley Fool. Mike has also offered debt elimination seminars to businesses and community colleges for many years.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Credit Card Foreign Transaction Fees

By Heshan Demel, CardRatings.com Reporter

Foreign exchange fees on credit cards should be of keen interest to those traveling beyond the borders of the United States. Exchange rates offered by credit cards may or may not be the best rates out there. Of equal and perhaps greater importance, however, is the foreign transaction fee that your credit card bill might show once you have returned home from your trip.

Many travelers now rely on credit cards to pay for overseas travel and purchases. For many consumers, credit cards are easier to keep up with than traveler's checks and they're almost universally accepted now.

Foreign transaction fees charged by credit card issuers will mean you may pay a little extra for that umbrella drink in the Caribbean or that Parisian pastry.

Also, you may find surprising that purchases of certain products from websites that are based outside the United States may be subject to this fee. For example, I paid for an Asian online TV service recently using a credit card. I found out that the actual processing of that transaction happened overseas using the bank there. So I was charged this fee even though I never left the U.S.!

Virtually every credit card assesses an international transaction fee for purchases done outside the 50 states, and that could even include U.S. territories like Puerto Rico and the U. S. Virgin Islands. Visa and MasterCard charge a 1% processing fee and most card-issuing banks add additional fees as well (on top of the 1% fee levied by MasterCard/Visa).

This fee is generally a percentage of the U.S. Dollar value of the transaction. So, even if you paid 100 Euros for a meal that was actually $125.00 (U.S. Dollars), the foreign transaction fees will be assessed on the $125.00 amount.

A January 2009 survey of credit card issuers revealed the following foreign transaction fees:

• American Express - 2.7%
• Bank of America - 3%
• Chase - 3%
• Citi Bank - 3%
• HSBC - 3%
• Wells Fargo - 3%
• Capital One - No Foreign Transaction Fee
• Discover - No fees. Accepted in China, the Carribean, Central America, Mexico and certain parts of Europe. Note: Discover is adding a 2% fee that will be effective for billing periods ending after May 1, 2009.

Despite fee hikes in the past year or so, credit cards are often still the most cost effective payment method for overseas travel, but you should consider fees when planning your trip and budget accordingly.

You maybe entitled to a refund of any Foreign Transaction Fees imposed between Feb 1, 2006 and November 08, 2006. Please refer to www.ccfsettlement.com.

Bon voyage!

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Heshan Demel is our Executive Vice President. He has a bachelor's degree in finance from Ouachita Baptist University in Arkadelphia, Arkansas and a Master's Degree in Business Administration (MBA) from the University of Arkansas at Little Rock, Arkansas. He has over 9 years of banking experience with Regions Bank where he was a loan analyst. He is a member of the Arkansas Young Professionals Network and enjoys ballroom dancing, travel, and entertaining.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Giving Credit Where Credit’s Due: Three Cheers for Richard Cordray

By Curtis Arnold, Founder of CardRatings.com


Richard Cordray, the Treasurer of Ohio, has been spear-heading a drive to get Ohioans to take a stand in favor of the proposed changes to the credit card regulations that are being considered in Washington. He hopes to gather between 5,000 and 10,000 comments by August 4th, when he'll submit them to the Federal Reserve, as well as to the Office of Thrift Supervision and the National Credit Union Administration, the other two agencies that are pondering cardholder-friendly provisions.

Cordray is asking Ohioans to join with him "to let the federal government know that we support these proposed changes that will help to end some of the worst practices of 'gotcha capitalism' by credit card companies." Specifically, he is calling for an end to:

• Unfair time constraints for consumers to make payments.


• Unfair allocation of payments among balances with different interest rates.


• Unfair application of increased annual percentage rates to outstanding balances. 


• Unfair fees for exceeding the credit limit solely because of a hold placed on an account.


• Unfair balance computation method.


• Unfair financing of security deposits and fees for issuance or availability of credit.


• Deceptive firm offers of credit.

"The proposed rules are just that: proposed, but not yet final," as Cordray puts it. "No doubt the opponents will be making their voices heard. … and we want them to hear a strong response from people who favor these rules."

In addition to busily promoting his credit card initiative in Ohio, Cordray is trying to get other state treasurers to do likewise. To encourage your treasurer to undertake a similar campaign against unfair and deceptive credit card practices, start out at the National Association of State Treasurers, where you can get the correct link for your state. I think every single one of them ought to follow Cordray's lead. Do you agree?

Would you rather speak out to the Feds directly? I recommend a quick visit to Consumer Action, which makes it easy to add your send in your comments. Any way you do it (and even if you don't agree with some proposals), I think it's important to let your feelings be heard!

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. His new book, How YOU Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line will be available soon! Pre-order online and receive a 37% discount.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Getting Dinged with a $250 Credit Card Credit Limit Increase Fee!

By Curtis Arnold, Founder of CardRatings.com


Not too long ago, one of my CardRatings.com colleagues came home to find an offer from Best Buy in her mailbox. It was for a MasterCard that came with some nice perks:

• An introductory APR of 0% – good for a year


• Four percent back on Best Buy purchases


• A minimum of 1% back elsewhere


• Two percent back during special promotions (e.g., for travel and dining)


• A point system, where your spending leads to reward certificates good for buying music, movies, electronics, etc. at Best Buy


• Members-only deals, sweepstakes, and sales


• The liability on unauthorized purchases is $0

Unfortunately, there were some not-so-nice features of this offer – for example, a 5% fee for cash advances. That's on top of a 25.99% interest rate for cash advances – no introductory rate here, folks! Getting a cash advance on a credit card is almost always a bad idea, but on this Best Buy card, it'd be incredibly costly and anything but a best buy.

There's a late payment fee of $29 to $35, depending on the balance. On top of that, "If at any time you fail to make at least your Minimum Payment in time to be credited to your Account by the Payment Due Date, or you exceed your credit limit, your entire Account balance will increase to the variable Default APR."

That’s 29.99%. Ouch!

Even worse, there’s a fee for credit limit increases (CLI). Here’s how it’s explained in the terms and conditions that accompanied the card offer:

“If requested and approved a CLI fee of up to 50% of the CLI may be charged to your account depending on your creditworthiness.”

In other words, say you're in Best Buy and come upon a fantastic sale. Rather than risk going over your credit limit, you call to see if you can get a $500 credit line increase. While you may get that increase quickly enough to take advantage of the sale, there may also be a $250 CLI charge on your MasterCard!!! So much for a great bargain.

The notion of a lender charging us for the privilege of making them more money has never sat well with me, even when we're talking about the typical $10 to $25 fee. Fifty percent is different. Waaaaaaaaaaay different.


One of my colleagues made some calls to ask the card issuer for an explanation. Someone in management was supposed to get back to us, but didn't. So we decided to do what anyone should do when they have questions about a card.

We called the toll-free customer service number. The service rep said that while there isn't a credit limit increase fee "at this time," it's a disclosure that there might be one in the future (we were also told that there is more than one variation of this card offer). The bigger issue, though, is the fact that they're even thinking about something like this. Simply put, this is downright scary!

Perhaps most disturbing about this Best Buy card offer is that all these consumer-unfriendly terms were really buried. They’re not in the fine print of the Schumer Box, where lenders are required to show their basic rates and fees. You’d only find them if you chose to read the teeny-tiny print that follows the Schumer Box.

And the Moral of the Story Is …
No matter how tempting the offer, read the fine print – and the teeny-tiny print before you apply. If it raises as many red flags as this card does, rip or shred it to pieces, whatever your pleasure. There are plenty of great credit card offers out there that do not have such worrisome terms.

Have you seen any egregious … or excellent … credit card terms lately? We welcome your comments in our popular credit forum!

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. Curtis is currently working on publishing a book about credit card usage with Pearson/Prentice Hall- more details forthcoming!

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

Beware of Credit Card Foreign Transaction Fees!

By Heshan Demel, CardRatings.com, Consumer Credit Researcher


Foreign exchange fees on credit cards should be of keen interest to those traveling beyond the borders of the United States. Exchange rates offered by credit cards are usually hard to beat. Of equal and perhaps greater importance, however, is the foreign transaction fee that your credit card bill might show once you have returned home from your trip. This fee, which is often a shock to cardholders, has been increasing as of late. So cardholders that travel overseas extensively need to be aware of foreign transaction fees.

Many travelers now rely on credit cards to pay for overseas travel and purchases. For many consumers, credit cards are easier to keep up with than traveler's checks and they're almost universally accepted now.

Foreign transaction fees charged by credit card issuers will mean you may pay a little extra for that umbrella drink in the Caribbean or that Parisian pastry.

Virtually every credit card assesses an international transaction fee for purchases done outside the 50 states, and that could even include U.S. territories like Puerto Rico and the U. S. Virgin Islands. Visa and MasterCard charge a 1% processing fee and most card-issuing banks add additional fees as well (on top of the 1% fee levied by MasterCard/Visa).

This fee is generally a percentage of the U.S. Dollar value of the transaction. So, even if you paid 100 Euros for a meal that was actually $125.00 (U.S. Dollars), the foreign transaction fees will be assessed on the $125.00 amount.

A March 2007 survey of credit card issuers by CardRatings.com revealed the following foreign transaction fees:

American Express - 2%
Bank of America - 3%
Chase - 3%
Citi Bank - 3%
Washington Mutual - 1%
Wells Fargo - 3%
Capital One - No Foreign Transaction Fee
Discover - Rarely accepted overseas so not part of this list

Despite fee hikes in the past year or so, credit cards are often still the most cost effective payment method for overseas travel, but you should consider fees when planning your trip and budget accordingly.

Update: You maybe entitled to a refund of any Foreign Transaction Fees imposed between Feb 1, 2006 and November 08, 2006. Please refer to www.ccfsettlement.com.

Bon voyage!

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Heshan Demel- Heshan joined the CardRatings.com family in January 07 but has supported them for many years due to his close friendship with its founder. He has a bachelor's degree in finance from Ouachita Baptist University in Arkadelphia, Arkansas and a Master's Degree in Business Administration (MBA) from the University of Arkansas at Little Rock, Arkansas. He has over 9 years of banking experience with Regions Bank where he was a loan analyst. He is a member of the Arkansas Young Professionals Network and enjoys ballroom dancing, travel, and entertaining.

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We welcome your comments about credit card issues in our popular credit forum!

CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

Citibank and Chase Adopt More Consumer Friendly Credit Card Policies

By Heshan Demel, CardRatings.com Consumer Credit Researcher


Citibank recently announced that they would be eliminating the controversial universal default clause from all of their accounts. At the same time, Citi announced that is also eliminating “any time for any reason” increases to the rates and fees of its customers’ accounts.

Traditionally, credit card issuers have taken the position that they can increase rates and fees at any time for any reason. As a result of the new policy, Citi will not voluntarily increase the rates and fees of any cardholder accounts until the card expires and a new card is issued (typically 2 years).

Chase also announced recently that they would eliminate the equally controversial double or two cycle billing method of calculating finance charges. This method of computing finance charges results in significantly higher finance or interest charges for cardholders who carry a balance on occasion. Chase also said it will ease up on some fees it charges customers who go over their credit limit (aka credit line). The company will stop over-limit fees at 90 days.

If you are unhappy with your current card for any reason (fees, rates, etc.), then you should definitely call your card company to complain. The card issuers are more receptive to cardholder requests now than they have been in many years due to the intense political and media pressure they are feeling. Use this pressure to your advantage! Many times a simple 5 minute phone call will lower your rate by several percentage points resulting in hundreds of dollars in savings. At the same time, most issuers are willing to reverse a $39 late fee at least once a year or so.

If you don’t get the results that you want from your current issuer, then start comparison shopping! The average credit card interest rate is currently around 15%. If your credit score is 700 or better, you should qualify for a rate around 10%. Shop CardRatings.com for the best low rate and low introductory rate card offers, as well as info. on how to obtain your credit score for free.

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Heshan Demel- Heshan joined the CardRatings.com family in January 07 but has supported them for many years due to his close friendship with its founder. He has a bachelor's degree in finance from Ouachita Baptist University in Arkadelphia, Arkansas and a Master's Degree in Business Administration (MBA) from the University of Arkansas at Little Rock, Arkansas. He has over 9 years of banking experience with Regions Bank where he was a loan analyst. He is a member of the Arkansas Young Professionals Network and enjoys ballroom dancing, travel, and entertaining.

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We welcome your comments about credit card issues in our popular credit forum!

CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thanks for your interest!

Credit Card Foreign Transaction Fees on the Rise

By Heshan Demel, Consumer Credit Researcher - CardRatings.com


Foreign exchange fees on credit cards should be of keen interest to those traveling beyond the borders of the United States. Exchange rates offered by credit cards are usually hard to beat. Of equal and perhaps greater importance, however, is the foreign transaction fee that your credit card bill might show once you have returned home from your trip. This fee, which is often a shock to cardholders, has been increasing as of late.

Many travelers now rely on credit cards to pay for overseas travel and purchases. For many consumers, credit cards are easier to keep up with than traveler's checks and they're almost universally accepted now.

Despite the convenience associated with using cards out of the country, there are normally costs associated with the convenience. Foreign transaction fees charged by credit card issuers will mean you may pay a little extra for that umbrella drink in the Caribbean or that Parisian pastry.

Virtually every credit card assesses an international transaction fee for purchases done outside the 50 states, and that could even include U.S. territories like Puerto Rico and the U. S. Virgin Islands. Visa and MasterCard charge a 1% processing fee and most card-issuing banks add additional fees as well (on top of the 1% fee levied by MasterCard/Visa).

This fee is generally a percentage of the U.S. Dollar value of the transaction. So, even if you paid 100 Euros for a meal that was actually $125.00 (U.S. Dollars), the foreign transaction fees will be assessed on the $125.00 amount.

A recent CardRatings.com survey of credit card issuers revealed the following foreign transaction fees:

American Express - 2%
Bank of America - 3%
Chase - 3%
Citi Bank - 3%
Washington Mutual - 1%
Wells Fargo - 3%
Capital One - No Foreign Transaction Fee
Discover - Rarely accepted overseas so not part of this list

Despite fee hikes in the past year or so, credit cards are often still the most cost effective payment method for overseas travel, but you should consider fees when planning your trip and budget accordingly. Bon voyage!

We welcome your comments about credit card and other money issues in our popular credit forum!

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Heshan Demel- Heshan is new to the CardRatings.com family but has supported them for many years due to his close friendship with its founder. He has a bachelor's degree in finance from Ouachita Baptist University in Arkadelphia, Arkansas and a Master's Degree in Business Administration (MBA) from the University of Arkansas at Little Rock, Arkansas. He has over 9 years of banking experience with Regions Bank where he was a loan analyst. He is a member of the Arkansas Young Professionals Network and enjoys ballroom dancing, travel, and entertaining.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online.
Click here for more details about using our articles and thanks for your interest!