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The Credit Card Game; New Rules, New Traps

February 27, 2010

Sweeping credit card reforms took effect Monday, eliminating a host of nasty industry practices. For example, your card issuer can no longer arbitrarily increase the interest rate on an existing balance. Nor can it apply payments to balances at lower rates first. But banks are already setting new traps. Among them: fees for not using your card and higher charges for balance transfers. Experts say this trend will continue as issuers look for ways to make up revenue lost because of the regulations.

What to expect
No restrictions on the types of fees issuers can implement,Higher credit card fee’s
Ex. Discover charging 2% fee on charges made outside of the country
Ex. Chase charging 5% to transfer a balance

Tougher to get a card
The amount of credit made available to consumers by credit card companies plunged by $252 billion, or 7%, between March and September of last year, according to IRA Bank Monitor.

Severely restricted in how they market cards to college students
More severe underwriting practices.
Consumers with poor or even a mediocre credit history, as a result, may find it much more difficult to get a card or have their credit limit extended

Fewer Rewards
issuers are now quietly becoming more stingy with their rewards in an effort to save money.
Ex. American Express recently told its co-branded card customers they would not be able to accrue reward points on their purchases if they were late with a payment. Only by paying a $29 fee could they recoup those points.

Raising Rates
One of the biggest victories for consumers in the new law are a series of limits on how and when credit card companies can set interest rates.

In recent months, banks have moved consumers over to so-called variable rate cards, whose rates fluctuate based on the direction of the prime rate.
The new law also does not include any sort of interest rate cap banks and issuers can charge customers that are late on their payment by two months or more.

Tips
Seek out smaller credit card issuers and credit unions to apply for cards
Read the fine print thoroughly

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