by Broderick Perkins
The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 has been phased in over time to give consumers greater protections and fewer costs.
But as each CARD Act effective date marshals in a new round of consumer protections, credit card issuers counter with moves to jack up the cost of paying with plastic.
Have you looked at the small print on your credit card statement lately?
Make no mistake about it, anti-gouging provisions of the CARD Act is costing credit card issuers money, but for card issuers that's probably just the cost of doing business until they can figure out other ways to squeeze card holders.
After all, they've been at the game much longer than regulators and they know how to take down pawns.
In it's May 2010 issue Consumer Reports (CR) says credit card issuers are making up for lost revenue in a host of ways.
Plastic subprime mortgage
What's in your wallet may surprise you.
The independent, trusted rater of goods and services said one company, First Premier, test-marketed a card with an annual percentage rate of 79.9 percent for borrowers with below-average credit. Sounds like a predatory mortgage. It dropped that loan sharking deal, but it still charges some customers a $95 processing fee to open an account.
CR also says Citibank raised many card holders' interest rate to 29.99 percent.
The average annual percentage rate (APR) for standard credit-card offers is 13.51 percent, the highest in five years, and an increase despite the prime rate remaining at 3.25 percent. Card rates are often tied to the prime rate.
More card issuers make you pay just for carrying the card in your wallet. One third of credit card offers comes with an annual price-of-admission fee ranging from $30 for basic plastic to hundreds of dollars for premium plastic.
Balance-transfer fees were often free with those zero-interest rate deals. Now they run as high as 5 percent of the amount transferred under some cards issued by JPMorgan Chase and Discover -- $250 on a $5,000 transfer fee right out of the gate.
The Center for Responsible Lending (CRL) says, once a useful tool to pay down or pay off debts, those zero interest credit cards -- -- have become ticking time bombs.
"Zero percent APR offers from credit card issuers are not what they seem. Typically your rate will increase after six months. And your rate could go up even more if you increase your balance on another account. Even worse, if you are late making a monthly payment, your rate could climb to 30 percent," CRL reports.
The center also says 90 percent of all card offers come with penalty rates, rates that rise if you are late on a payment and or rates that rise on cash advances.
Smart consumers are shredding credit cards.
Those who don't, and also don't manage their credit card like a stock broker manages trades, can become pawns credit card issuers take to the cleaners.
"Don't be fooled by teaser rates and cash advances. Under current policy, teaser rates can last a much shorter term than you might anticipate. A cash advance will raise interest rates for longer than expected -- a single cash advance can still raise the interest paid decades later if an account is never paid in full," CRL reports.
Bottom line? Read the small print. Read it again. Get someone to explain what it means.
Check your APR every time you get your monthly statement to make sure your account has not been repriced. If it has, consider moving the balance to another account. If not, stop using the card and pay it off.
Because of the rising cost and new level of fees, it's best to avoid plastic whenever possible. Use a debit card and live within your means.
If you really need credit, consider a personal loan or other credit with a fixed rate and minimal fees.
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