Photo (cc) by michael_swan
Credit card companies are patting themselves on the back after a new report shows they’ve gotten rid of many “unfair” or “deceptive” practices consumers complained about. But that same report also says credit card companies have found new ways to stab you in the back.
First, the good news: Since Congress passed the Credit CARD Act last year, credit card companies are behaving much better…
- Gone are steep interest-rate hikes on existing balances. The new law bans credit card issuers from unilaterally raising those rates, which was widespread before the law’s consumer protections kicked in.
- Less than a quarter of credit cards now have over-limit fees without prior consent, which is down from more than 80 percent in July 2009.
- Despite the new law cutting into credit card issuers’ fees, they haven’t really added any new fees not covered by the law. In fact, the number of cards that include an annual fee actually went down – by 1 percent from July 2009 to March 2010.
“While it’s been less than a year since passage of the Credit CARD Act, the new law appears to be working for millions of Americans who have credit cards,” says Shelley A. Hearne, managing director of the Pew Health Group.
But there’s bad news, too.
“Most of the news is good, but we are seeing the rise of new harmful behavior,” Hearne says. Namely…
- Steeper fees for cash advances and balance transfers – up to a median 4 percent as of March, from 3 percent in July 2009. And credit union cash advance fees rose a half-percent, to 2.5 percent.
- Continued widespread use of various, other penalty interest rates.
- A disturbing trend of credit card companies failing to disclose penalty interest rates in their online terms and conditions.
“Although we applaud changes by the card industry to create a fairer and more transparent marketplace, our research shows that some challenges remain,” said Nick Bourke, director of Pew’s Safe Credit Cards Project and the report’s co-author.
“For the first time, we have seen credit card disclosures warning consumers that interest rates could go up as a penalty for certain actions, but not stating how high those rates could go,” Bourke said.
“When issuers withhold vital pricing information, it leaves cardholders in the dark and puts their financial security at risk.”
So what can you do?
- When you sign up for credit card, don’t read just the online terms and conditions. Make sure you get the paper version, and if you have any questions, call the toll-free number and ask.
- Unless the mafia or a payday lender are your only other loan choices, never use your credit card for cash advances.
- As always, don’t assume the government will do your job for you. As you can tell from the above, just because the Credit CARD Act passed doesn’t mean credit card issuers won’t look for loopholes to extract fee from you. Be ever vigilant.