Recent federal rules have made credit and debit cards a little more customer-friendly. A cap on fees and rules requiring better communication between company and consumer have been, by and large, welcomed by card users. However, this does not mean that every single loophole has been closed. The famed Credit Card Act did a lot to help consumers, but people still need to keep their wits (and sense of suspicion) about them when they are applying for a credit card and combing the fine print of the user agreement.
Here are some things that users still need to be aware of in the post Credit Card Act world:
1. Credit card companies are supposed to give 45 day notice that they are changing their interest rates. However, this does not mean that you actually have 45 days left on your current interest rate. The 45 day rule is applied to statements, so your statement 45 days after the announcement of a rate change will reflect the increase (is it ever a decrease?). However, companies can start charging you that increased interest rate at the beginning of the statement period. Since most statement periods are one month, that means that the increased rates actually start about two weeks after the notice, not 45 days. So the interest rates will apply to any purchases made during that statement period that begins about two weeks after the announcement of a rate change.
3. It almost goes without saying that you shouldn’t be late on your credit card payments. However, people who are more than two statement periods (60 days) late can be hit with higher interest rates. That is to be expected; if you don’t take care of your accounts, you’ll get hit with some serious penalties. Here’s the catch, though: the company can retroactively charge you the higher “penalty rate” for all purchase that you made when your account was still in good standing. That’s right, your entire balance unpaid balance gets hit with a higher interest rate if you are more than 60 days tardy.
3. Lower interest rates are a welcome change that was brought about by the credit card act. However, the interest rates are not lowered across the board. As in the past, cash advances are a huge no-no for credit card holders. Use your card at an ATM and you’ll be hit with some serious fees, plus a higher interest rate on the money you withdraw.
4. Another loophole that does not have to do with credit card companies, but still catches consumers off guard, is the convenience fee that some businesses and services charge. Credit card swipe fees are still in place, so businesses have to pay a fee to the credit card processing company (Visa or MasterCard, usually) every time that you use your card. This is why you can’t pay off a charge card or some other regular bills with a credit card or debit card (they require cash or check so that they don’t get hit with swipe fees). Other businesses simply pass on the swipe fees to customers, charging them a “convenience fee” every time that they pay via credit card or debit card. This can easily be avoided by paying by old fashion check or with cash, when applicable. Some businesses also allow you to pay your account via bank transfer (similar to a reverse direct deposit).
So what can you do? The Credit Card Act did a lot to protect consumers who generally take care of their credit card accounts. People who pay on time and are aware of the interest rate loopholes are generally better off after the CCA. This is a free market, so cardholders can respond to interest rate hikes by simply canceling their card and taking their business elsewhere. Of course, keeping low balances that can be paid off immediately is important if you want to remain mobile in this manner.