A new law that prohibits any card rate increases without banks and issuers informing cardholders first will also require card companies to notify consumers 45 days in advance before raising annual percentage rates or APRs.
The credit card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 is considered by consumer advocates as a milestone in consumer rights protection. Advocates and lawmakers say that the law is expected to place tougher regulations on the credit industry.
Because of the law's newer and tougher restrictions, banks and card issuers are looking for legal loopholes to overcome any obstacles.
Because any excess amount over the minimum monthly payment will also be forwarded to the balance with the highest interest and then to subsequent balances with lower interest rates, more and more financial institutions are considering other alternatives to earn more profit.
The new law will also mean that card applicants under the age of 21 will also have a harder time getting plastic. Underage consumers will also need to present a valid proof of income or have a co-signor before banks issue them credit cards. At present, most cardholders owe up to $4,000 by the time they leave college.
Although the credit industry as a whole agreed to comply with the law and its regulations, some experts say that the industry's sincerity is hard to swallow.
Despite the law's tough mandates, industry analysts say that many banks and card issuers are searching for loopholes to make up for potential losses by the time the law is fully implemented. For instance, they point out, more card companies are raising transfer fees and other charges. The law does not prohibit any hikes to other fees and charges and banks are capitalizing on this to earn as much profit as they can.
Experts add that some financial institutions are already raising APRs in anticipation of lower income from overdue payments. Cardholders and consumers can also expect to see lower credit limits and fewer rewards programs. Already, experts say, some card issuers are cutting back their rewards programs and slashing credit lines to their lowest mark in recent years.
Analysts advise consumers to make use of their rewards points as soon as possible to avoid losing them once the law takes full effect in February. They are also recommending that cardholders choose only cards which offer cash-back rewards and not point-based ones to save money.