If you thought that this finally brought the end to banks and credit card companies’ bloodsucking practices, think again. Banks started devising new ways to bite you in the ass before the new rules took effect.
Granted, there is no way to foresee every move and counteract it through legislation. In fact, it is also phenomenal that the bill was not killed at conception. May be there is some change at Washington after all (though we still have miles to go). Corporate America and the legislative bodies became bed partners long ago it is not going to change any time soon. But that’s a different subject.
Some are of the opinion that the new law called the Credit Card Accountability, Responsibility, and Disclosure Act of 2019 whose acronym interestingly is CARD, is good news to the consumer. I’m of the opposing opinion that it is hardly adequate. Why?
For one, though the new rules do stipulate that banks cannot raise interest rates, this is only for old balances. They still can hit you on new charges. And there is no cup on what interest they could charge you.
Rates have been going up even for people with good credit scores and payment history, sometimes to ridiculous levels.
You can refuse to accept the new rates – banks must give you 45 days notice – but you must stop using the card and pay off the balance within 5 years. You also have the option of paying double the minimum payment until the full payment is made. Make sure to demand in writing that the account be closed so you have a paper trail as any charges (even accidental such as a forgotten automatic charge) can reactivate the card at the new rate (ouch!).
There is also the matter of variable APRs, which is not covered by the new law. This means that the interest rates on credit cards can rise or fall each month. Banks are not required to inform you of rate increases when the rate is variable. Not surprisingly, banks are now beginning to adapt variable interest rates. And banks have ways to manipulate this rate.
Also to note is that the new law does not kill that obnoxious animal creditors like to call “universal default”. This is the practice of financial institutions increasing interest rates when you get late or default on another unrelated account.
Under the new provision, credit card companies cannot raise past rates based on universal default but can raise rates on future charges with 45 days advance notice. And they can raise the rates to whatever they want.
The upfront charges on subprime cards will not exceed 25 percent of limit on new credit cards for the first year. This is supposed to help curb the practice of issuing cards with close to limit upfront fees (therefore putting the consumer in debt before even making a purchase).
Again, they will try to make up for this with high interest rates and higher minimum payments. And God knows what will happen once that first year is over. How about a 79.9 percent APR? Yes, it’s real I didn’t make it up (see Credit card’s newest trick: 79.9% interest).
Yes, banks still have a huge leeway to legally raise interest rates on credit cards to atrocious levels, charge (ever increasing) new fees and other creative ways to squeeze more money out of you and me. And they still can slash you credit limit(s) and shut down your account without notice regardless of your payment history.