Wednesday, January 6, 2010

Credit Card Reform OUCH!

The Credit Card Reform Act of 2009 was a well-intended and long overdue attempt to stop the credit card fee insanity that imprisons many consumers. But, the Feds underestimated the creativity of their opponents, and they made a big mistake in giving the card companies warning. So what happened? Faster than reform could be implemented card companies rushed to the offense and implemented aggressive sneak attacks before they became illegal.

You became a risk
At one time card companies could raise your credit card rate if you were late on any other bill, even if you were never late on your credit card bill. It was called “universal default”. They justified this by claiming you were a risk. But since the Reform will eliminate this type of action, the card companies rushed to get rate hikes in.

They changed your minimum payment requirements
Say you signed up ABC Bank’s great balance transfer deal way back in 2008. This was a great deal because you took your high-interest balance from XYZ Bank’s card and transferred it to a really low interest card, saving you a bundle in interest rates. But suddenly the economy takes a dive and ABC Bank is suffering from loan loss and the challenges of Credit Card Reform, where are they going to look for money? Why, to you, of course! They do this by raising your minimum balance from 2% to 5%. The result is that you asked to pay a lot more each month. What if you can’t? You call ABC Bank and they’ll offer to lower your minimum payment back down at or close to the 2%, but they ski rocket your interest rate much higher than your initial great deal. This has nothing to do with your payment history, which could be perfect. You just get a lousy rate.

Your credit limit drops
A reduced credit limit can hurt your credit score because part of the formula used to calculate your score is the amount of credit available. A big gap between how much you spend and how much you have available is viewed as responsible credit handling. This is especially important if you have a need for a loan, like a mortgage for example. If a credit card suddenly reduces your credit limit, it looks like you’ve done something wrong when in reality you may not have done anything to hurt your credit.

These actions hurt many consumers deeply. So how do you fix credit card wounds? Go shopping, for a different card that is. Start with Coors Credit Union and you’ll find the following:

1. Our cards don’t offer too-good-to-be-true rates. Always be skeptical of cards that offer incredibly low rates.

2. Simple terms. The longer the terms and disclosures the more traps.

3. No account opening fees. Subprime credit cards often implemented a fee just to open the card, putting the user into a situation similar to payday loans. The Reform Act limits the amount of this fee. Coors Credit Union has never charged account opening fees and does not offer subprime credit cards.

See all the benefits that make the Coors Credit Union a trustworthy credit card.

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