Archive for the ‘Credit card’ Category

CARD ACT: CREDIT CARD STATEMENTS NEW LOOK

August 18th, 2010 Vijaianand

Beginning of this month, we saw an update on the CARD Act and talked about possible changes expected to happen in response to the bill both from credit companies perspective and personal level.  Making credit card statement simple and easy to read is one among many changes requested by law. Many credit companies and banks made those changes way ahead and you should be getting new version of your credit card statements now. It is really very detailed in every aspect for the consumer.  Thanks to Card Act 2009.

If you are an American express credit card member, you should have also got a pamphlet explaining the changes in your credit card statement. Not all banks and credit unions spent time and money to explain the changes to their consumer. Let us see the changes in details by looking at the old and new statement side by side.












OLD NEW




Click the images to zoom


OLD Statement

If you look at the old statement, it is simple and abstract with just about details. It shows the amount due, minimum amount due,  transactions details and available credit. That’s about it. If you incur any financial charges, it shows that in the bottom. It doesn’t explain, whats it is the minimum payment due, how it can affect your balance? What are the fees on this statement? It is very basic and only helps people who are familiar about how credit card works.

NEW Statement

On the other hand, new statement is very elaborate and detailed. Even for first timer, it is clear and tells what happens when only minimum payment due is only paid.  It surely will help many consumer looking for answers to their basic questions on their statement.  Lets look at new sections added in the statement one by one.



1. Warnings Section

This warning section clearly explains about late fees and minimum payment due. It will really help to put the things into perspective if they only make minimum payments. We can hope many consumers who will be alarmed to see the numbers and may consider paying full on time.





2. Summary Section

In this section, they summarized full activity of the credit account clearly to give a detail picture by breaking it down to show the fees, advances, interest and so forth. It is a very important section which will surely help even experienced credit consumer.




3. Fees and Interest Breakdown

This last section at the bottom might seem redundant but it another break down of fees and interest charges. If you have fees for late payment or cash advances, this will break it down to show them. Also if you have many different interest changes, Interest charged section will show that in detail.  Last but not least, Interest charge calculation section gives an idea how interest is calculated and charged.



I took my DCU credit card statement and AMEX had similar sections and most credit card statements should have them as well according to the law. These new addon sections to the credit card statement comes real handy for any type of consumer. We can only hope atleast now everyone reads their credit card statement and not give silly excuses they don’t understand it.

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CARD Act & Act of Credit card companies

August 5th, 2010 Vijaianand

Few months back, I got a letter from Citibank regarding my cashReturns credit card like many other consumers. The letter states  that they will start charging annual fees from April 2010 onwards.
 

Thanks to new credit card rule changes by CARD(Card Accountability Responsibility and Disclosure) Act 2009 which took effect last month.(July 2010) It is causing waves of destruction to many good credit card holders. It’s good and dandy to have rules to protect creditcard consumers but it shouldn’t come at the cost of efficient credit handlers causing lot of hassles and loss of benefits.

Click here to refresh your memory by taking a Quick lookup at CARD Act.


After Effects, Moves and Maneuvers

Adding to the bloodshed caused by the economy downturn and higher defaults, the new law changes costs more for the credit card companies. In order to compensate the loss, many companies worked tirelessly since last year when the bill was signed, trying to find new ways to tackle the bills and balance their income sheet. They either hiked the already existing fees or invented new fees and pushed to consumers. Afterall credit card companies are in the business to make money.

Below are the list of some common after effects and maneuvers by companies to get over this bump.

Resurection of Annual fees: Annual fees are back again after 10 years to make another round. They used to only exists for air miles related cards but now it is going to be ordinary credit cards as well. Several banks adding these annual fees to even existing accounts like Citirgroup. Many Citigroup customers will start paying a $60 annual fee on April 1. They offered an option on how to get the fee waived by averaging monthly charges above or equal to $200. According to their new process, they will credit the fee first and reimbursed part of the fees every month depending on the usage of the card $200/average per month. Check out the letter copy if you want.


Vanishing Rewards Programs: My Visa credit card provided by DCU offered reward points and it is going away as per their recent communication. Their excuse, high cost associated with the program and also CARD act. They are planning to offer reward programs seperately with high percentage credit cards. It doesn’t make sense. If a good consumer who has a credit card with low percentage won’t get rewarded and cannot earn points for their best effort to their account. That’s totally not right. 

Raise old fees and add New fees: These include a $1 processing fee for paper statements for cards issued by stores such as Victoria’s Secret and Ann Taylor. Inactive fee starting from $15 will be charged if the card is not used for certain period, example $19 inactivity fee charged by Fifth Third Bank. no customer activity for six months. Also overdraft fees are increased as well.

Rate Increases: The average rate offered for a new card climbed to 13.6 percent last month from 10.7 percent during the same week a year ago — meaning cardholders had to pay almost 30 percent more in interest, according to Bankrate.com. Many banks including JPMorgan Chase raised their cost of balance transfers to 5 percent of the transfer from 3 percent.


Some cards linked to rewards programs for purchases like gasoline were shut down. Card companies also slashed credit limits for millions of accounts that remain open. Besides making credit more expensive, banks also made it harder to get and keep credit cards. One big reason: Since the financial meltdown, many credit card issuers have been trying to reduce risk.

These changes might not come as surprise to many but still we have to adapt and make proper changes in our credit card usage. As per me, I already closed my Citigroup card which started charging annual fees and will continue carry cards with no annual fees.  There are many good things came out of this bill particularly now the bills are clear and very detail. That will be very good thing for average consumers.

Recommendation

Keep an eye out for credit card statement and policy changes and take the decision to whether you want to continue to carry the costliest card or go for cover under a better card with no strings attached like Costco Truesavings or Bank offered credit cards.

Sources: chronicle.northcoastnow.com & Chron.com

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NEW CREDIT CARD HOLDERS PROTECTION BILL – Changes and Challenges

July 21st, 2009 Vijaianand

President signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 into law on May 22, 2009. Amending the Truth in Lending Act, the Credit Card Act of 2009 requires certain measures to be implemented by the credit card companies in order to comply the new law and help consumers, taking efffect on July 2010. Let me share the changes and challenges of this new law from my research.

Changes
Some changes to look out from the credit card companies:


– Require CC companies and banks to give customers a reasonable time, such as 21 days, to pay the bill before it is considered late.

– Bans double-cycle billing, which eliminates the interest-free period for consumers who move from paying the full balance monthly to carrying a balance.


credit card bill– Prohibits retroactive rate increases unless the cardholder is at least 60 days behind in paying the bill. If a person does fall behind and the rate on past buys is increased, lenders must restore the lower rate after six months if the cardholder has paid monthly bills on time.


– Requires lenders to post their credit card agreements on the Internet.


– Requires that customers receive 45 days notice prior to any change in the annual percentage rate (APR).  The notification must also inform cardholders that they have the right to cancel the account before the effective date of the rate increase. If a cardholder cancels the account, the cancellation cannot be considered a default on the account, and cannot trigger an obligation to repay the account in full.

– Prohibited from increasing annual percentage rates (APRs) that apply to existing balances unless specific conditions apply. An APR may be increased only if
1) the index on which the rate is based changes,
2) it is a promotional rate that has expired,
3) a cardholder fails to comply with a hardship workout plan,
4) the account falls 60 days past due.

– Requires anyone under 21 to prove that they can repay the money before being given a card, or have a parent or guardian promise to pay off their debt if they default. (Big blow for college students)


– Prohibits over-the-limit fees unless a cardholder elects to be allowed to go over a limit.


– Requires lenders to say how much time it would take and how much money in interest would be paid if only the minimum monthly payments are made.


– Requires that gift cards remain valid for five years. Under the Senate’s rule, retailers and others that issue Visa, MasterCard, American Express or Discover gift cards or certificates will have to print explicit dormancy fee information on the card. Sellers of the cards will also have to inform the buyer of the fee.


– Bans “pay-to-pay” fees, which are charged when someone pays the bill by phone or on the Internet.


– CC companies need your permission before allowing you the “privilege” of spending more than your credit limit and paying a fat $39 fee for that privilege.

Other features of the Credit CARD Act of 2009 include:

If different APRs apply to separate portions of an outstanding balance, the amount of any payment beyond the minimum payment due must be applied to the portion of the balance with the highest APR.

If the payment due date is a date when a creditor does not receive or accept payments by mail (e.g., weekends and holidays), the creditor cannot treat a payment received on the next business date as a late payment.

Credit card companies are prohibited from charging a fee based on the manner in which a payment is made (e.g., on line, by telephone).

Some of these reforms are already on track to take effect in July 2010, under new rules by the Federal Reserve.

Challenges

The new law will be a savior for many credit card holders who are facing credit card debts with high fees  during this tough times. But for people who pay off their bills in full each month, and milk card rewards programs for everything they’re worth, there is some cause for concern. After Home affordability and stability plan, this new law is passed to help distressed credit card holders affects consumers who act and does thing right. They might be less in percentage compared to the other group but still a reasonable crowd not really happy about this change for certain reasons.

1. These restrictions will cost more expenses for the credit card companies. To compensate, there are chances of them assessing annnual fees and increase or add other fees.

2. Good credit customers are offered happy rate of 0% APR which already vanished the scene and will never been for a long time to come.

3. With added restrictions, it is going to be hard to get credit cards, which might  make more people strapped for money in this tough times.

4. Stripping reward programs – For months now, the card companies have been threatening to cut rewards programs sharply to make up for revenue lost because of the new restrictions. So will credit card companies kill reward programs or drastically scale most of them back? Of course not.


“If you strip away the reward component of a credit card, it’s essentially a commodity,” said Rick Ferguson, editorial director at the loyalty marketing company LoyaltyOne. “The reward is what gives it its personality. It works from a branding perspective as well as a mechanism to influence customer behavior and consolidate spending on a particular card.”

In all, I would say, this new credit card protection bill has lot of good measures packed to help all credit card holders whether they going thru tough times or not. It is very good step forward and should be welcomed but we will have to wait and see how it plays out in the field.

Image source: abcnews.com

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