Will the Fed enforce new tough credit card rules? Maybe. Let's look at the new rules.
First, we must recognize that Congress passed laws regulating credit card companies back in May. It was called the Credit Card Act. It required that:
- Credit cards issuers must provide more transparency by disclosing the terms of their customer agreements.
- Credit card rates would not be raised unexpectedly.
- There would be no rate increase during the first year after a new account is opened.
- Cards could not be issued to persons under age 21, unless the borrower can make the payments or has a parent co- signer who can make the payments.
- Consumer consent is needed before creditors could charge fees for transactions that exceed their credit limits and curb fees to sub prime cards for customers with risky credit.
- "Two cycle' billing is banned where a creditor raises an interest rate and charges the higher rate for a customer's previous borrowing.
Now all of this is fine and dandy but Congress missed the boat completely when it passed the Credit Card Act. It failed to regulate credit card rates. This is probably the key factor in helping Americans to get out of debt. We are living in a zero interest rate environment. There is absolutely no reason to have credit card rates at 16 to 20% and sometimes higher. What is happening is that borrowers are locked in to high rates and some may never be able to pay off their debts. We are keeping them in poverty, so to speak.
If the Fed and Congress really want to help the consumer, then lower the rates on credit cards to say 3% and allow borrowers to pay off their debts. Then they can start to buy again and help the economy.
And don't say this is not possible. The Fed is allowing the big banks to borrow from the discount window at 0 - .25% and has pledged $11.2 trillion dollars to bail out the bankers.
Should credit card rates be set at 3%?
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Reader Comments (Page 1 of 1)
10-01-2009 @ 3:36PM
al coholic said...
Well it wouldn't surprise me if that kind of relief didn't do a lot more for the economy than the present path we are following. On the other hand nearly everythng the government sticks it's nose into eventually turns out to be a detriment to all.
10-01-2009 @ 4:57PM
numerwan said...
All i care about is not allowing them to close credit cards for no frickin reason... "Oh you havnt used it in a while... closed" yea and there goes my effing credit score...
10-01-2009 @ 5:45PM
Iridium said...
THE GOVERNMENT DOESN'T WANT PEOPLE TO GET OUT OF DEBT!!! If people are out of debt they don't need the government to help them and control their lives.
It's great that they passed new regulations that won't go into effect for another two years. It doesn't help anyone now.
I can't close my credit accounts because it will kill my credit score. I can't use my credit accounts because they were all hiked to 29% even though I had a 0 balance and never missed a payment in my life. If I close the accounts and wait to open new accounts when the rules go into effect I will never get the same credit line I have now.
And yes the government should have forced every credit balance held by anyone in good standing to 3%. People who have never missed a payment should have the ability to pay off their debts because they will be the responsible ones who will pull the economy out of recession. instead these people got the shaft and you can bet they will never use credit like they did again.
The banks will all go out of business because people will refuse to take it up their rear ends again. it is already happening, people just aren't spending unless they have to and when they do they are using cash.
10-12-2009 @ 11:48PM
jcm77450 said...
I have a great credit history ,last month Chase Bank credit card bill came in, increasing a minimum monthly payment from 2% to 5% without notice , this card has a fix 3.9% till balance fully paid, I called the bank and their answer was this, we can decrease the minimum to 2 % but will change the terms to 7.9% interest till July 0f 2010 and there after the outgoing rate over 20% what a frustrating situation for a middle working American
10-13-2009 @ 10:16AM
Wayne said...
I know that high interest rates are very unpopular, but the rate has almost nothing to do with the interest rate banks pay to borrow funds; it is all risk based. Right now the industry charge off rate is above 10%! For every $100 spent on a credit card only $90 will actually be paid back to the bank. In order for the credit cards to be profitable they have to charge insane interest. The rates will never go down to 3%.
The lesson here is DON'T SPEND MONEY ON A CREDIT CARD IF YOU CAN'T PAY IT OFF IMMEDIATELY!
If you have questions check out my blog and email me questions.
http://ourcrazyeconomy.blogspot.com/
10-13-2009 @ 11:24AM
flacorps said...
The Debtors' Revolt is on, started by YouTube phenom Ann Minch about a month ago.
http://www.youtube.com/watch?v=jGC1mCS4OVo
With the chargeoff rate crossing 11.52% according to Fitch and further months of record breaking defaults in the offing, the major credit card banks are headed the way of Advanta Bank (into the dustbin of history).
Even the Junk Debt Buyers aren't buying this toxic paper anymore. It will soon be time for TARP II.
http://www.tfgi.com/200908/buyers-of-bad-debt-wait-out-consumer-worries/
Debtors who need hope will soon be looking for some down and dirty survival strategies.
http://www.financialhopeseries.com