Posted on June - 23 - 2011
The Credit CARD Act Works But More Needs to Be Done
According to industry researchers including those at the Pew Foundation, the credit card laws passed by the federal government within the past few years are doing a good job to protect consumers. Under the CARD Act, for example, credit card companies have to be more clear and transparent about the fees and charges they impose, and they also have to follow stricter guidelines about billing and interest rates. But many experts agree that still more can and should be done to help ensure safeguards for consumers.
On an NPR radio show devoted to personal finance, one researcher suggested that although banks warned that if the CARD Act passed we would see a dramatic increase in annual fees on credit cards, that didn’t happen. Annual fees did not generally increase, and neither did more card companies start requiring these yearly membership fees. But banks have socked it to their customers in other ways, like increasing fees on ATM transactions or checking accounts, and regulators may need to keep closing loopholes and forcing banks to stop charging outlandish fees on any of their various financial products.
One area that could use improvement and more oversight may be in regard to “teaser rates” or those popular zero or low interest credit card offers. While customers love them, banks count on the fact that the majority of people who accept these discount teaser rate offers are going to carry a debt balance past the expiration date on the introductory offer. That gives the bank to then charge high interest rates. In effect what happens is that the introductory rate really becomes a type of deferred or delayed payment loan. That’s fine, as long as the average cardholder understand the math and is financially literate enough to figure out that if they don’t plan carefully they can end up paying dearly for a so-called bargain. Perhaps when regulators update their CARD Act provisions they can figure out a way to make this kind of somewhat complex or tricky financial arrangement easier to understand through a combination of greater bank transparency and proactive financial literacy initiatives.
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