It seems as if credit card issuers continue to look for loopholes to circumvent the Credit CARD Act of 2009. Not even two short years after the law originally passed, credit card companies are already taking the hit with a loss of revenues from the restrictions on when and if they can charge fees, increase interest rates and more. The latest issue to arise doesn’t have credit card issuers jumping through hoops, but it may provide an additional loophole for consumers. This time it is all about the promotional and introductory offers from credit card companies that seem to clog up your mailbox on a weekly basis.
More than likely, you have received one or more of these introductory credit offers at some point in your life. You may have even taken advantage of one or two of them. Introductory offers are those credit cards that say you can pay zero percent or a very low interest rate on credit card balance transfers and/or purchases for a set period of time. A good example can be the new introductory zero interest rate on balance transfer from Capital One® Platinum Prestige Credit Card. If you were to apply for this card today, you would have zero interest on your balance until June of 2012. Not only can an introductory rate help you save money on balance transfers, but now it may protect you from an interest rate increase too.
Late and Delinquent
When the new credit card laws went into effect, one of its policies became a regulation on when a credit card issuer can increase an interest rate. The law states that if a consumer is more than 60 days delinquent on the account, the credit card issuer has the right to raise the interest rate on the card. For new credit cardholders, however, the law protected them from rate increases for one year after establishing the card. For cards with introductory rates, the law states that the interest rate increase cannot occur until the introductory rate period expires. But, what if the consumer is delinquent on a credit card that is still in its introductory period? This question seemed to confuse both consumers and credit card issuers, but the confusion ended last week.
Interest Rate Increase
Now, the Federal Reserve has clarified when a credit card issuer has the right the raise an interest rate on a credit card account that has an introductory offer. As of March 18th, event if you’ve accepted a promotional credit card deal, a credit card issuer may still increase your interest if you become 60 days delinquent on your account.
Although, the passing of the CARD Act is supposed to protect consumers from interest rate increases and fee levies from the credit card issuer that are unexplained and unexpected, it is not construed to allow delinquencies. Since there seemed to be some confusion on how the new law applied to introductory offers where the account holders were delinquent, the Federal Reserve has now cleared that up with its latest clarification announcement on the interpretation of the law. That interpretation is simple – don’t be late on making your payments because at that point the law can not protect you and your rate will increase.