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Card Credit Interest Rate - Interest Rates & Credit Card Terms: What the New Credit Card Act Means

fees consumers cards bill

The new bill that has been recently passed by the US Senate in an attempt to regulate the unfair practices of many banks that offer credit cards. It was mostly aimed at lowering the fees that financial institutions charge when a payment is late, balance goes over the limit, when the user takes out a cash advance or transfers a balance. While this was a great step to somewhat regulate the industry, it is unlikely to have much of a positive effect for consumers. As a result, banks will likely introduce new fees to compensate for the reductions. Many consumers may also see interest rate increases on their statements. They should receive an advanced 45-day warning about the upcoming rate change.

Currently, banks can immediately penalize the consumer for a late payment by increase the rate. With the new rule, the credit card holder will have a 60-day grace period before the bank can retroactively apply a higher interest rate to the balance. If a payment is more than 60 days late, the interest rate increases but after six consecutive on-time payment the credit card company will have to bring the rate back down.

The bill also prohibits rate increases during the first year the account is open. If the credit card rate is increased, the new rate will be applied to new charges only. Today extra payments are applied toward the balances with lower interest rate first. When the bill goes fully in effect, the extra payments will be paying off the higher rate balances. Promotional rate may still be in effect but for a minimum of six months. This will prevent the unfair bait-and-switch tactics. Today many consumers receive credit card offers in the mail advertising low rates and favorable terms. Unfortunately, as they sign up, the terms change and become less than desirable.

As far as fixed interest rates, credit cards may not offer them at all. Same goes for the reward programs. Most credit cards will have annual fees in exchange for better rates and terms. Some companies may also charge application fees. Annual and application fees can not exceed 25% of the credit limit. Higher fees for the foreign transactions will be introduced. Other various fees may be charged to make up for the lost revenue.

Consumers who have good or excellent credit history should be eligible for low interest rate. It is still possible to negotiate an interest rate decrease by calling the bank. Same goes for annual fees. The fee may be decreased and even waved for the credit worthy customers. Lenders want to keep good customers and will go an extra mile to satisfy them.

Although the new bill is supposed to put an end to predatory lending practices, the consumers will still be bombarded with various fees, maybe even more fees than before, if not careful. When it comes to interest rates, credit cards companies will do whatever is necessary to make up for the lost revenue and make a profit. After the announcement of the changes coming, many consumers are considering switching to cash or debit cards to avoid paying high credit card interest rates.

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