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[03:46:12 AM Tuesday, November 06, 2007]
Low Interest and Rewards Credit Cards - Who Really Carries Their Costs?What is deregulation? It is the abolition of the Government's regulation practices, the act of taking off limitations in any sphere of the State's structure. If we refer the term to the credit card industry, we get sky-high interest rates, fabulous penalty fees and all sorts of other charges that serve as the main source of revenues for credit companies. However, not all customers fall victims to the deregulation of the credit card industry. A recent study revealed the actual payers of the cost of unregulated credit card practices. They are most financially vulnerable American families that are eligible for subprime credit cards only with all those huge fees and rates. It is evident today that major credit card costs are mostly imposed on customers least able to afford them. Why? The result of the deregulation is that the lowest interest and no fees credit cards designed mainly for a limited number of customers have to by subsidized, and it is effectively achieved at the expense of subprime cardholders' wallets. Latinos, African Americans and low income families are open to the attack of self-profit credit card companies, and it is them who compensate for the amount gone in lavish credit card rewards, freebies and additional programs. It is not that difficult to understand the credit companies' move. In an attempt to rack up credit cards sales and expand the customer base, companies do not stint tempting incentives and effective advertisement. And once they find customers who can be blinded by all this boon and caught up in a trap, they make them pay the price. Let's try to trace the history of credit card deregulation and see its point. The beginning of the deregulation was marked by the Supreme Court decision to eliminate caps on credit cards interest rates in the native state of the bank. A further weakening of the regulation led to the confusing and obscure character of a fine print and the credit company's freedom to change credit card terms any time and for any reason. It is not infrequent that a bank sends you a letter with the payment due date change too late for you to pay the bill. Thus you find yourself charged a huge penalty late fee and increased interest rate. Your one-time default on one credit card is a good enough reason for other credit companies to penalize you. That's what the deregulation in the credit card industry leads to. As a result, one-third of credit cardholders are reported to pay interest rates in excess amounting to as high as 41%. Households with low incomes are more likely to pay penalty fees and rates than households with top incomes. Latino and African American cardholders carrying balances are more likely than white customers to pay interest of as much as 20% and more. Well, so far the relationship between credit card issuers and borrowers is still regulated by the deregulated credit card practices and the statistics proves that. |
