Negative Effects of the CARD Act of 2009 for Consumers
Posted by CardOffers.com Staff | September 25th, 2009 | General Information, New Rules
Heated debates about the Credit Card Accountability, Responsibility and Disclosure Act of 2009, or the CARD Act of 2009, began to take place long before the Act went into effect in February 2009. Critics emerged from a wide range of sources, including consumer interest groups, grassroots organizations, and various special interest groups associated with the financial industry. While many of the warnings about what the Act would do to the economy have not come to pass, a few negatives have emerged.
The underlying purpose for the CARD Act is to provide protection for consumers. Within the text of the Act are provisions that make changes in the way credit card companies manage existing accounts, the structure of various types of credit card deals, and how the terms and conditions are disclosed on various types of credit card offers. The idea is to make sure all consumers understand exactly what type of commitment they are making before they submit any type of credit card application. There are also provisions designed to make sure current card users are always informed in a timely manner of any changes in the terms related to the account.
As the various provisions are implemented incrementally, consumers can look forward to changes in how interest rates are increased, ample notice of any impending changes in the structure of the account, and the timely reception of the monthly credit card statement. Along with changing the way some credit card companies work, the Act will also make changes in how gift cards are issued, how fees are charged on the cards, and how information about fees, expiration dates, and other essentials are presented to potential customers.
While all these provisions sound wonderful, a couple of negatives have emerged. One has to do with the interest rate itself. With most of the provisions of the CARD Act not going into effect until nine months after the passing of the law, some credit card companies chose to increase their rate of interest. They were able to move quickly in accomplishing this, since the provisions requiring that they give customers a 45-day notice of any changes to their accounts were among those that did not go into effect during the first nine months. As a result, some consumers found themselves paying a noticeable increase in interest on their outstanding card balance.
Another negative side effect has been the changes in some of the benefits offered by even some of the best credit card companies. One example has to do with rewards programs. Many credit card offers come with a rewards program that allows users to accumulate points that can either be cashed in at some point or used to purchase merchandise. The number of points is often calculated based on a percentage of the qualified purchases made using the account.
While not every provider has gone this route, there are examples of decreases in the percentage used to determine the number of points earned in any given billing period. For example, a consumer may have a gas credit card that once offered a five percent reward on qualified purchases. Suddenly, the points are now calculated using three percent instead.
Along with changing the way rewards points are calculated, some providers who charge a flat annual fee for participation in the rewards program have adjusted that fee upward by as much as 20 percent. The end result is that the consumer pays more to participate in a program that offers less benefit.
For casual users who do not pay much attention to the rewards programs, this change is likely to go unnoticed. But for consumers who use those points for everything from buying holiday gifts to purchasing airline tickets, this shift in policy means a very real loss of resources. In some cases, the decrease in benefits may be enough to cause a consumer to begin looking at other credit card offers.
There is also the possibility of a few other fees and charges appearing before the provisions of the CARD Act are fully implemented. Some credit card companies already charge a transaction fee when a customer wishes to make a payment by phone. This type of service was once provided free of charge. While the number of providers who charge this type of fee is still relatively low, there are indications that more providers are quietly implementing this policy. In fact, many consumers will probably overlook the notification of this fee that is likely to be buried in a new copy of the terms and conditions mailed to each customer. Instead, they will only come to realize what has happened until they try to make a payment by phone and are confronted with the charge.
Speculation about the effect of the CARD Act on increased charges for mailing statements or making online payments does appear in some quarters. There are a few providers who do already charge fees for these services, but those charges were in place long before the concept of the CARD Act came into being. However, at this time there is no evidence that any card provider is currently considering the addition of these types of fees.
The good news is that not every credit card provider has or will increase interest rates in the short-term. Some will also choose to leave their existing rewards programs in place with no changes in terms of the annual fee or the formula used to calculate the points accumulated each billing cycle. This means that consumers who want to look for another credit card provider do have options.
If you are unhappy with changes made to your credit card account in recent months, take some time to check out credit card ratings for different providers. Also scan the Internet for credit card reviews related to any provider that attracts your attention. There is a good chance you can find at least a couple of providers that will beat the deal you currently have in place, and come closer to offering you the benefits for which you have grown accustomed.
Tags: Card act of 2009
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