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Establishing and maintaining good credit is an important part of financial planning. Typically most individuals do not have enough money for emergencies, or to make major purchases such as a home, car, or college education.

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Wednesday, November 17, 2010

Credit Card Providers Find Ways Around New Credit Card Regulation

The Credit Card Accountability, Responsibility and Disclosure act, which passed in May 2009, was meant to protect bank card consumers from large interest rates together with bad behaviors constructed inside the credit industry - along with enable the government to effectively regulate this side of banking.

We certainly have seen several positive things from this legislation, but just a year later many credit card providershave realized loop holes to move their higher costs upon customers, reported by a write-in the Wall Street Journal.

The key protection the Credit Card Accountability, Responsibility and Disclosure Act supplies the public is from credit card companies raising interest rates on existing accounts, and also on accounts which have been opened in the first year.

Some situations of loop holes utilized by credit card issuers:

JP Morgan’s Chase raises the minimum payments from 2% to 5% of the balance. Regulations impacts on the amount they could raise interest rates, however , there is simply no kinds of provision to guard the minimum payments.
First Premier Bank charges $95 dollars for processing fees, prior to the account is even opened. First Premier Bank offers credit to folks with not very good fico scores and poor credit history.

Citibank increased a selection of their customers’ interest rates before they made a late payment, after which it offered a partial refund of finance charges in the event the customer paid their bill punctually. This process gets Citibank around the legislation of the inability to increase customer’s interest rates as a result of making late payments.

One other popular scheme could be to charge substantial processing or annual fees any time beginning a new card. As an example several credit cards offer a $300 credit limit, plus a $75 annual fee. Again regulations do not specifically help you avoid this process, given it has no effect on the interest rate. A lot of lenders are employing this technique to pass many of the fees to you.

Bank in August, the Federal Reserve released a new set of regulations impacting the credit card industry that address a provision that require card penalties to be proportional towards a company’s true costs, and also demand that card companies consider lower interest rates for customers who previous saw interest rate increases every six months.

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