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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Chase No Longer Increases Rates Based on Credit-Bureau Information

By Curtis Arnold, Founder of CardRatings.com


Chase is no longer increasing the rates of cardmembers based on their credit-bureau information as of March 1, 2008.

Consumer advocates have long decried the controversial industry practice commonly known as universal default, under which a customer’s rate could be automatically raised based on a single late payment to another creditor. And, although Chase ceased practicing universal default in 2005, Chase is now going further by completely eliminating rate increases based on credit-bureau information. This change is part of the continuing expansion of Chase's Clear & Simple initiative – an ongoing program to help Chase customers better understand and manage their account.

Effective March 1st, 2008, Chase may raise a customer’s interest rate if they violate the terms of the cardmember agreement by making a late payment, exceeding their credit limit or paying with insufficient funds. However, if a customer’s rate is increased for any of these reasons, Chase offers cardholders a way to lower their interest rate through its “rate reset” option: If a customer signs up for automatic payments and makes on-time payments for 12 consecutive months, Chase will reset the customer's rate to the lower, original non-promotional rate.

I commend Chase for being serious about making their cards more consumer friendly. Given the intense political and media spotlight on the card industry this year, Chase has really raised the bar with this announcement (Citibank is the only other issuer that I'm aware of that has made a similar announcement- they announced earlier this year that they would be eliminating “any time for any reason” increases to the rates and fees of their customers’ accounts). Let's hope that other issuers follow Chase's lead!

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.

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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!

Proposed Regulations for the Credit Card Industry: Do They Go Far Enough?

By Curtis Arnold, Founder of CardRatings.com


In late May, the Federal Reserve came out with its proposals for changing the rules that the credit card industry must follow. The goal, according to Federal Reserve Board Chairman Ben S. Bernanke:

“… is to make sure that consumers get key information about credit card terms in a clear and conspicuous format and at a time when it would be most useful to them … . Greater clarity in credit disclosures allows consumers to make more informed credit decisions and enhances competition among credit card issuers.”

The proposed changes primarily focus on how information is disclosed to us – how it should look, when we should receive it, and what we must be told.

Three Examples

1. The interest rates and fees would be clearer and easier to comprehend. Under the Fed’s proposal, whether it’s on an application, a credit card offer, or a statement, some of that fine print will actually have to be in a larger type-face, with key rates and terms in bold-face. Also, the details on penalty rates would be highlighted. In other words, it would be clearer that you’ll be hit with a penalty rate if you pay late.

2. Issuers would have to give us more time. The Fed wants lenders to give us 45 days notice – instead of the current 15 – before they make changes to the terms of card agreements. That way, we’d have more time to pursue other options. Fixed-rate credit cards would have to come with a guaranteed rate for a specific amount of time. Believe it or not, the way the regs now read, credit card issuers only have to give us 15 days notice before they hike the interest up on fixed-rate cards.

3. Credit card bills would have to be a lot clearer. We’d be able to better see how much we are being charged for what, be it in interest or in fees. Lenders will have to show how they allocate payments, what the effect of that will be, and even where you should go for consumer education – to the Fed’s own website! :-)

Perhaps the most interesting of the Fed’s proposed changes is that it wants lenders to have to show how much it will cost if you only send in the required monthly minimum amounts. They would also have to show how long it would take to get out from under paying only the minimums.

Do They Go Far Enough?

The consensus among consumer advocates seems to be that the proposals are okay … as far as they go. But they don't go far enough, especially when it comes to some of the most consumer-unfriendly of the credit card industry's practices. It would have been great, for example, if the Fed had proposed an end to the practice of universal default, where if you're late on one bill, lenders can raise your rates way up on all your other accounts.

Another key industry practice that would be left unchanged under these rules allows card issuers to charge the new sky-high rate on your already existing balances, even though they had already lent you that money at the old rate.

For more on what consumer advocates and even some card issuers have to say, I recommend Kathy M. Kristof’s excellent article in the Los Angeles Times, where she interviews many experts. Please check out the proposed regs as well, and then you can tell the Federal Reserve what you think of them. Please express your thoughts on our forum as well!

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.

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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!

Simmons Bank Credit Card Has Many Consumer-Friendly Features

By Mike Killian, CardRatings.com Debt/Credit Management Reporter


Recently, U.S. Senate hearings and Federal Reserve proposals regarding excessive credit card fees have filled the news. At such times it is refreshing to promote a card issuer whose card has been touted as being consumer friendly for many years.

I am referring to Simmons First National Bank based in Arkansas and specifically to their Simmons First Visa Platinum Card. This card is truly unique as is the lending institution itself.

A case in point involves the recent U.S. Senate testimony concerning the controversial universal default clause. This practice allows a lender to change the terms of a loan when that lender is informed that their customer has defaulted with another lender.

For example, you purchase a big screen television at 7% interest on your credit card and then the credit issuer discovers a default with another creditor in your payment history. All of a sudden the issuer jacks your rate up to a 33+% interest rate. This is universal default in action. Consumer advocates obviously oppose this practice and yet the practice permeates the credit industry in one form or fashion. Not so with Simmons First, though, who has never had any such policy.

Simmons has boasted one of the lowest card rates in the country for many years- currently a fixed rate of 7.25%. As expected, Simmons requires an excellent credit history in order to qualify for this premium rate. In addition, there are other benefits worth noting:

• No annual fees


• No balance transfer fees


• 25 day grace period


• A cash advance fee that is capped at $50.00

Late fees are also lower than most cards in the industry and their default payment policy includes a 15.25% default interest rate. In comparison, some major issuers have default rates as high as 32+%. This simply means that if Simmons First finds it necessary to raise your rate because of excessive non-payment and/or late payments, your interest rate will not jump to 32+%, but to only 15.25%.

Simmons also offers an attractive benefits package to its cardholders. In addition to the benefits listed above Simmons First also offers travel insurance, emergency cash and a host of other services.

Robert Dill, Executive Officer & Marketing Director of Simmons First Bank Card Center, noted the following during a recent interview.

"In 1967, Simmons First was the first bank in Arkansas to offer customers the BankAmerica Card, now VISA. It was our intent to offer a bank card with a competitive rate and unmatched customer service.

That was forty years ago, and Simmons First continues to receive national recognition for consistently having one of the lowest interest rates in America. Additionally our record of impeccable and responsive service has been cited recently by the Wall Street Journal, Consumer Reports and Money Magazine."

In short, if you are looking for a card that offers a low ongoing rate along with many other consumer friendly features, then you should definitely consider Simmons First.

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

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This article was orginally published on CreditBloggers.com by Mike Killian. 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.

Mike offers free consumer advice on the CardRatings.com Credit Forum as well as on his own site, Learning Credit and Debt Management. While at his site, you can view additional articles, blogs and forums.

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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 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.

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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 thanks for your interest!