{"id":1554,"date":"2010-03-10T19:51:04","date_gmt":"2010-03-11T02:51:04","guid":{"rendered":"http:\/\/www.bspcn.com\/?p=1554"},"modified":"2010-08-23T07:11:41","modified_gmt":"2010-08-23T14:11:41","slug":"what-the-credit-card-act-means-for-you","status":"publish","type":"post","link":"http:\/\/localhost\/wordpress\/2010\/03\/10\/what-the-credit-card-act-means-for-you\/","title":{"rendered":"What the Credit CARD Act Means for You"},"content":{"rendered":"

Written by Matthew Amster-Burton<\/a><\/p>\n

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Got credit card debt? If so, good news: the card issuer can no longer hike your interest rate without warning or raise rates on an existing balance. They have to send your bill at least 21 days before it\u2019s due (up from 14 days). And each bill has to show how long it will take to pay off the balance if you make the minimum payment\u2013and how much you\u2019ll pay in interest if you do that. Call it the credit card equivalent of the Surgeon General\u2019s warning.<\/p>\n

These reforms\u2013and many others\u2013are due to a single new law, the Credit CARD Act, which came into effect last month. Great! Who hasn\u2019t been surprised by one or more of these practices?<\/p>\n

\u201cThis new law is good, and it does stop a lot of bad things,\u201d says Kathleen Day of the Center for Responsible Lending, a consumer watchdog group which published a handy guide to the new law<\/a>. \u201cBut it doesn\u2019t stop everything, and you know they\u2019re going to find new ways around it.\u201d<\/p>\n

Why do the card issuers play these games? It\u2019s not because they\u2019re jerks and like watching you suffer. (That\u2019s a side benefit.) They do it to make money. Take away these revenue streams, and the card companies aren\u2019t going to roll over. Right now they\u2019re rubbing their hands together and coming up with new schemes.<\/p>\n

Let\u2019s be like the writers on 24<\/em> who sit around coming up with hypothetical terrorist attacks, and figure out what the credit card issuers are going do next.<\/p>\n

A crackdown on deadbeats<\/h5>\n

A deadbeat dad is one who never pays his child support on time. But to a credit card issuer, a deadbeat is just the opposite: a customer who always pays on time and therefore never pays any interest.<\/p>\n

Interest is the single biggest chunk of credit card profits. The card issuers have always done their best to turn deadbeats into debtors. Got a pesky customer who always pays on time? Make sure their bill arrives a few days before it\u2019s due, then, when they pay late, slap a 30 percent penalty APR on their entire balance.<\/p>\n

The CARD Act makes it harder to pull this maneuver off: they have to send you the bill earlier, and you have to be 60 days late before they can jack your APR. But you can still blow it the old-fashioned way: occasionally pay less than the balance due.<\/p>\n

\u201cThe house is making a bet that you will not live up to your intentions,\u201d says Chris Farrell, author of The New Frugality<\/a><\/em> and economics editor at American Public Media\u2019s weekly radio show Marketplace Money. \u201cIf you will pay it off at the end of the month, and you can pay it off at the end of the month, and you actually have that discipline, it\u2019s a really good deal. The strategy doesn\u2019t work if it turns out you do it every other month.\u201d<\/p>\n

If you do show steely discipline and pay in full consistently, the card issuer is now likely to reward you by lowering your credit limit or canceling your account. Happy trails.<\/p>\n

Here, have some rewards<\/h5>\n

That\u2019s not to say that reward cards are going away. In order to explain why credit card issuers love reward cards, I have to use a term that will make many of you close your browser in disgust. It\u2019s not dirty, it\u2019s boring: interchange fees.<\/em> Although, when you think about it, it does sound kind of dirty.<\/p>\n

When you swipe your card for a $100 purchase at Urban Outfitters, the store doesn\u2019t receive the full amount. A few pennies go to Visa (or MasterCard or Amex). A much larger chunk, 1 to 3 percent, goes to the bank that issued the credit card. This is the interchange fee.<\/p>\n

The interchange fee isn\u2019t the same on all transactions. It depends on a lot of factors, one of which is whether you\u2019re using a reward card: reward cards carry higher interchange fees.<\/p>\n

So, thanks to the CARD Act, you\u2019ll be receiving more junk mail advertising reward cards (especially if you have a high FICO score). They\u2019re a great deal for the banks: higher interchange fees; reward cardholders charge more than the average person, to maximize the reward; and a significant percent of the rewards go unredeemed. Got some useless air miles sitting around? Join the zero-mile-high club.<\/p>\n

Oh, they\u2019ll surely be hiking interchange fees, too. And since merchants aren\u2019t allowed to charge customers extra for using a credit card, everyone will pay more\u2013even cash customers.<\/p>\n

Fees, fees, fees<\/h5>\n

\u201cPeople are going to see many more fees,\u201d says Kathleen Day. Here are a few favorites:<\/p>\n