Credit Card Companies Implement Work Arounds As Reform Gets Closer

The Credit CARD Act sets a deadline of February for many changes to credit card policies. In preparation for expected loss associated with reform card companies have been and still are making changes to protect their profits.

Bank of America, Chase and Discover Card both switched many of their cardholders from fixed to variable rates. This allows the companies to raise rates when the prime rate goes up without actually implementing rate hikes. Rates would just naturally rise and fall along with prime. Card companies raised some consumers card rates raised since the Act was announced in May to squeeze in higher rates before the deadline.

Lawmakers had recently introduced legislation to move up the effective date of new credit card reforms by two months to Dec. 1, but that’s up for debate in the House. The push for an earlier date is to disable last minute rate hikes.

Another way banks are looking to protect credit card profit is by implementing or raising annual fees. According to Bank of America new annual fees will range between $29 and $99. BoA also stated that the fees would not be coordinated with the card services, but with consumer profit. In other words, the people who pay cards late or carry a balance would pay a lower annual fee, since they contribute to the banks bottom line. The “good” consumers who don’t add interest income would be charged more.

Meanwhile, I urge you to look at your credit card terms & conditions and read all statements and notices, especially now as things are changing. And if you are looking to change, do look at your credit union offerings. Consumer Reports recently reviewed credit cards and determined that the best and most trustworthy cards were offered by credit unions, associations and specialty retailers.