Acting off the public and congressional outrage over lending practices, the Federal Reserve created new rules Tuesday geared to protect credit card users from getting slammed by heavy late fees and other penalties.
Late fees have been capped by the Federal Reserve at $25. Some creditors were charging up to $40 for making a late payment. These fees sometimes increased balances and those close to their limit could easily be pushed over with available credit, then incurring an over limit fee of about $35.00. Now, multiple fees for a single late payment are considered a no go for creditors.
Penalty fees cannot exceed the dollar amount associated with the customer’s violation. Meaning, the charge you incur for a single transaction should not exceed the dollar amount of said transaction.
Inactivity fees, recently introduced through a loop hole in the Credit Card Act, have also been banned. Creditors created this asinine condition for consumers who do not use the account to make new purchases on a regular basis.
New rules also require creditors to reconsider high interest rates inflicted on consumers since 09. A lot of creditors took advantage of the new laws in place and created new terms and coinciding fees to apply. These may be next on the chopping block.
While the Credit Card Act was set in place to protect consumers big banks found loopholes and still created new terms and conditions to counter balance the losses from new regulations. These new rules take effect on Aug. 22. So how long before big banks dig their holes through these new policies?
Fact remains at the end of the day the Federal Reserve and big banks still run this country. With secret societies and midnight meetings on mysterious islands, big banks are not going to lose their profiting place in the consumer market. These new rules come to comfort average Joe and ease him back into spending without worry of big banks bullying them with outlandish fees.
And some things never change…
Creditors can still charge whatever they want for interest. First Premier is offering their bad credit Visa at 79.9% APR. The same creditor that goes to 0% in a debt consolidation program. I have two myself enrolled…
Interest rates remain at a variable rather than a fixed rate. Billing cycles are still between 28-32 days and are scheduled in accordance with receiving the most fees from the variable rate applied.
Creditors are still lowering available credit limits without notice or reason which lowers your FICO score. This also causes the unknowing consumer to overspend, thinking they have more than they thought they did – and then incurring an over the limit fee.
Minimum monthly payments are still at such a low percentage of the debt that its only purpose and service to the consumer is the continued maintenance of their good credit standing via timely payments. Minimum monthly amounts are still designed to keep you in debt, not get out.
Minimum monthly payments are also immediately applied to the lowest interest rate between purchase, cash advances, and balance transfers. That means in order to pay down the higher interest rates on your account you’ll need to pay more the minimum monthly to even begin putting a dent in it. The fact there are different rates for different transactions in itself is mud pie BS. You’re given a line of credit – why does it matter how you use that line of credit? If I cash advance it or spend it all at BP on BS, what’s it really matter? What justifies charging different rates for different types of transactions? Profit. Who lets this happen? We do by playing the game.
We’re repeating a cycle. To end the recession…. To stop the bleeding… we need not open any new wounds of debt against the nation that adds to our deficit. A re-learning needs to take place on how we spend and manage money. It starts with you, then your neighbor- and so forth.
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