Designed to help protect consumers against , The Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) will take effect on February 22. While some of the more problematic practices by credit card issuers have been addressed by the CARD Act, credit card companies have been busily creating new fees and charges to replace lost revenue caused by the law’s more stringent guidelines.
Many credit card issuers are adding an annual fee for the privilege of having a card. These fees are charged each year whether the card is used or not and can range from a modest $25.00 to over $100.00.
Inactivity fees are also being added to the terms of some credit cards. This could signal trouble for American consumers who have been battling to pay off debt and have “locked away” their credit cards to keep from using them. Inactivity fees are levied on credit cards that haven’t been used in a set period, usually one year.
Changing how a variable rate is calculated will garner some extra profit for credit card issuers. Usually, in the past, interest rates on a variable rate card were tied to the prime rate using the formula of prime plus a certain number of points. Some credit card issuers will now still tie to the prime rate, but to the average prime rate over a period of time. Th prime rate is fluid and changes frequently. This means that the credit card user doesn’t benefit immediately by the prime rate dropping and lowering his interest rate immediately.
Another area of concern for those trying to manage debt by transferring balances from high interest cards to lower interest cards is higher balance transfer fees. In the past, the average balance transfer fee was around 2 percent. Banks are now charging as much as 5 percent and many are dropping their offers of free balance transfer on new cards.
Now, more than ever, it’s important for those managing credit card debt to carefully read the terms of their credit accounts and be wary of hidden fees.
