Adapting to Change- Creditors Find Ways Around the New Credit Card Rules

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For all too long, the credit industry has had its tentacles firmly clasped upon consumers in all age brackets and income levels. Designed to lift those tentacles one by one, the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 is poised to go into effect today - February 22, 2010, with the intention of providing consumers with some form of empowerment over their own credit practices and costs.

While the act does include several valuable relief measures, credit card companies are not to be outdone -nor are they willing to release their grasp on our wallets that easily.

Finding new and creative strategies to recoup some of the financial loss that they expect to experience has been on the top of their "to do list"  -long before the laws were enacted or in effect. 

First, let's look at the changes that will help consumers avoid many of the tricks and traps of credit card practices. Each of these changes is designed to protect consumers by simplifying terminology and making creditors more accountable.

Unfair rate increases and the universal default clause have been eliminated. This means that if you are late on one bill, a different creditor cannot use that to justify an increase in your interest rate. It also means that creditors cannot hike up the interest rate on a whim.

Limits on credit issued to the under-21 crowd are now in effect. This one protects college kids -those most sought after by creditors, from getting heavily into debt before the truly understand the repercussions and how the credit industry operates.

Fee calculations are more structured eliminating inconsistent payment cycles, over-the-limit charges without the consumer's consent, and extra interest charges due to pesky double-cycle billing practices.

Favorable interest rates must stay in effect for new credit cards for at least 12 months unless they have been issued as a promotional rate. In that case, they must stay in effect for 6 full months unless the consumer has been 60 days or more late with his payment.

Creditors are now required to use understandable language in all documentation and fine print including applications, billing, and notices. Statements must show how long it will take to pay off the debt incurred if the consumer only makes the minimum payment due.

Any changes to a consumer's credit card account cannot take place until he has been given at least 45 days notice.

Unfortunately, credit card companies and banks have already come up with new ways to replace revenue lost because of the new changes.

A few of these methods include;

One dollar fees for issuing paper statements are expected to bring in several billion dollars annually across all creditors. To opt out, you need to sign up for electronic statements.

Some creditors are adding inactivity fees or increasing annual fees, reducing rewards, requiring card holders to request rewards that were once automatically sent to them, and placing expiration dates on rewards.

Creditors can request that their card holders agree to the over-the-limit charges in order to have the ability to exceed their credit limit if they need to do so. If consumers don't read the fine print, they might just agree to this without understanding what it means.

Switching from fixed-rate interest charges to variable ones effectively allows the creditors to increase interest rates on consumers every time the prime rate goes up.

If you want to protect yourself from the credit card companies, read all of the documentation sent to you, line by line. Monitor all of your credit card accounts regularly to identify changes as they occur.

Finally, shop around for the best credit card for your personal needs taking note of interest rates and annual fees. Often, the best rates and terms are found with local community banks and credit unions.

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