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Tracy Becker
President
North Shore Advisory, Inc.
155 White Plains Rd. Suite 203
Tarrytown, NY 10591
Co-Author
"The Credit Solutions Kit"
Phone 914-524-8300
Fax 914-524-5014
Visit Website
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Credit
Card interest rate and fee hikes
Panic
is setting in now that the new credit card rules are set to take effect in
2010. Credit card companies are in a frenzy to cut losses in
preparation for the limits that have been set for them in 9
months. This is causing great annoyance to Congress and consumer
advocates.
By
February 2010 issuers will no longer be able to lower limits, charge higher
rates, and ask for more minimum payments without cause. Many of
the transfer fee's have gone up from 3% to 5% and may continue to
soar. We have also seen minimum monthly payment requirements change
from 2% to 5% of balances due.
The
new laws, as discussed in our past Newsletters, will include the end of
credit card companies being able to raise rates on existing balances unless
the borrower was at least 60 days late and would require the original rate
to be restored if payments are received on time for six months. The law
also states that banks must get customers' permission before letting them
go above their limits and also using this as a reason to charge extra
fee's. It is unclear why these new rules were not set to take effect
immediately. Why wouldn't the creditors use this extra time to build
fee's and interest from us when they know full well it will be difficult in
2010? Why did Congress give them this extra time in the first
place? It seems pretty obvious that with no punishment and their clear
view of the future limits to come this would occur.
On this other side of the coin, Creditor's feel that they will have a new
burden of underwriting risk when these rules go into play. If they no
longer can charge higher rates to riskier consumers (consumers with lower
scores) how do they account for the losses they are likely to incur in the
future? In June Credit Card losses hit a record high of 10.44% and the
average credit score has been decreasing since the economy has
changed. If the new rules curtail their ability to charge the interest
and fee's they need to write the higher risk consumer they will have to
charge more across the board no matter how high your score is.
Samuel
Wang, vice president for public affairs at Citi said, about hikes in rates
and fee's, "These changes also reflect the dramatically higher
cost of doing business in our industry as we work to preserve the broad
availability of credit," he said.
Copyright
©2009 North Shore Advisory Inc.
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