Credit Card issuers proposing new fees, thinking up ways to subvert interest-rate restrictions

[Amerigo Vespucci]

Dodging Credit-Card Reform
Card issuers are already proposing new fees and thinking up ways to subvert interest-rate restrictions

By Ben Levisohn

http://www.businessweek.com/magazine/content/09_38/b4147026262530.htm?wtf

New credit-card rules, designed to curb the industry's abusive practices, went into effect a few weeks ago. But already lenders have found ways to get around the regulatory roadblocks—moves that may cost consumers in the end. Says Gwenn Bézard, head of research at consultant Aite Group: "The industry was against the spirit of the act."

The reforms are sweeping. The Credit Card Accountability, Responsibility & Disclosure Act of 2009 covers everything from billing to fees. The first wave of changes hit in late August, with another to follow early next year. For all their worries, credit-card companies may not see dramatic losses. In fact, the spate of interest rate hikes on credit cards, driven in part by the recession, may boost profits. Says Gene J. Truono, managing director at BDO Consulting: "Issuers always reinvent themselves."

Companies have already rethought rates. Under the new law, issuers can't raise them without 45 days' notice. But there's a loophole: The rules don't apply to variable-rate cards, with rates that float up and down. That's why companies are moving more consumers into such cards, whose rates are likely to soar from their record lows. Researcher Bankrate.com (RATE) estimates variable-rate cards will account for 75% of all cards this year, up from 65% in 2008.

C.D. Reimer of San Jose was switched to a variable card last month. At the same time the issuer, Barclaycards, upped his rate to 26.99% from around 16%. Reimer could have canceled the account. But the 40-year-old was laid off from his software support job and depends on plastic. Barclaycards declined to comment.

[villager]

1. time to withhold payments and call a "strike..."

n/t

[HillbillyBob]

3. I have no cards personally my partner has 2 one for farm equipment

and a bank card. We use those sparingly. Makes me glad I never really tried to get them.
If we chopped them up and mailed them back, I mean all of those that have them and work on paying them off they would not have any business.

[Hassin Bin Sober]

2. Barclaycards declined to comment.

And probably pulled C.D. Reimer of San Jose's file as we speak.

[Joanne98]

4. This is the model for healthcare reform. Look at it!!!!!!!!!

We got a WEAK CC Bill and now it's WORSE THAN BEFORE!

[WI_DEM]

5. I've almost paid off all my credit cards and I'm tearing them up.

they are nothing but trouble.

[Sal Minella]

6. New York Times running "The Card Game" series, very helpful.

People trying to use debit cards now instead of credit cards are being blindsided by extra fees and charges.

The "overdraft protection" you did NOT sign up for can mean a $34 overdraft charge for a $5 cup of coffee, since the banks don't let you know that your account is dry (and why should they when they can charge you 3000% interest on the loan you automatically receive without knowing it).

http://www.nytimes.com/2009/09/09/your-money/credit-and-debit-cards/09debit.html
From yesterday's New York Times.

If you call the bank and tell them, "I want the overdraft protection turned off" the first people you talk to will tell you it can't be done, but if you speak to a manager, the "overdraft protection" scam can be halted in your account.

These debit card fees now account for more bank income than credit card interest, says NYT.

Looks like using a credit card and paying it off every month is once again the way to go.

[Statistical]

7. Thats why I just use credit card but pay it off.

However the temptation is always there. I was horribly in debt before and will NEVER go back there unless necessary.

I can understand the ease at which consumers spend just a little more and then little more, then revolve a little balance and then need to buy this unexpected thing or that thing and end up with huge revolving balance.

However I strictly use the credit card like cash, only using it for expenses I can pay. I collect my cashback and pay the card in full each month.