Many credit cardholders have lately been getting a lot of notices from their respective credit card companies, informing them of a new wave of changes in fees and charges. Credit card companies have been scrambling to increase fees and rates ahead of the implementation date of the Credit CARD Act, which will be fully enforced in February 2010. There are no sacred cows in this latest venture of credit card companies. Even customers who have outstanding business relationships with credit card issuers are not spared.
For example, customers who have good payment histories have started to receive letters from credit card companies informing them that their annual interest rates will be jacked up by as much as 23.99%. In addition, cash advances will now carry a charge of 27.99% of the total withdrawn amount.
People who have bad payment histories are particularly affected with the current development. Some banks have increased the annual interest charges of individuals who fall into this category by as much as 79.99%.
Credit card companies offer their customers a way out of the astronomical fees, but the consequences is adverse. Cardholders can opt out of their credit card accounts, which would naturally lower their credit to debt ratio, resulting to lower credit scores.
The Credit CARD Act has caused credit card issuers to act aggressively and recklessly. Under the CARD Act which will take effect in February 22, 2010, banks will not be able to raise fees on customers unless they are 60 days late on their payments. Hence, card companies are taking advantage of the time they have left in their hands to raise fees and create new charges.
Consumers and cardholders are enraged with the fee hikes with many accusing card issuers of being callous, insensitive and greedy. Some lawmakers have taken cue on the widespread public discontent and have lodged recommendations to put a cap on interest fee and penalty increases.
Democrat Congresswoman Slaughter of New York is one of the proponents of the interest cap measures. She stated that it is their duty as lawmakers to protect consumers who have to put up with unreasonable fee hikes (that typically range from 20% to 80%) imposed by banks.
It is still too early to tell whether the recommendations would actually benefit consumers in the long run or would have a detrimental effect on customers and cardholders. One scenario would be that banks may increase the requirements for credit card applications, making it harder for clients to acquire credit and establish credit histories.