How the Credit Card Accountability and Disclosure Act will Protect You

How They Hook You,  Screw You, & How The Credit Card Accountability and Responsibility Disclosure Act will protect you.

How Credit Card Companies Have Been Screwing People for Decades

For decades, credit card issuers have found new and conniving ways to screw their customers with deceptive offers and changing rules. Finally, though, Uncle Sam is intervening in an effort to level the playing field and eliminate the corporations’ misleading tactics.

The recent passage of the Credit Card Accountability Responsibility and Disclosure Act renders many of the profiteering exploits of banks illegal. Credit card companies will no longer be able to distribute their confusing agreements full of ways to make money off their unsuspecting cardholders.

How They Hook You

The marketers at credit card companies are very persuasive when it comes to attracting new customers. We’ve all received the letters in the mail highlighting all the benefits we’ll receive by switching to their card. They point out all the features they offer with the amount of credit you receive always emphasized above almost all else. Teaser interest rates are offered for a few months in order to entice potential cardholders. Readers are drawn right to the teaser rate, which is in much larger font than the rest of the text on the page. It’s nearly impossible to find the regular rate. They make it very convenient to sign up. The application and approval take only a few minutes online and the card arrives immediately. Getting money was never easier.

How They Screw You

Credit card companies are armed with a plethora of methods to screw you, many of which you are unaware of until it’s too late.

• They take advantage of universal default, which means if you are late on a payment for something else – however unrelated – they raise the rate on your card.
• If you go over your limit when you buy something, your card still gets approved at the register. Only later you find out that you just incurred some big fees and they hiked your interest rate from then on.
• They can hike your interest rate to however high they want as long as they give you 15 days notice. (And they admit that it can take 10 days for their letter informing you of the new rate to get to you.)
• Rate increases are retroactive. If you have $1,000 on your card already, and your interest rate goes up, you now owe the higher rate on that previously accrued  $1,000 too.
• Your bill can be mailed to you up to 14 days before it’s due and it often takes 10 days to get to you. Plus, they can decide your bill is due at any time of day they want, ensuring the greatest possibility of you being late and owing big time.
• If you have money on your card with different rates (say from a balance transfer and also from purchases), when you pay your bill, they can apply your payment to the lower interest balance first. That way they can charge you extra interest.

How the Act Protects You

The government passed the Credit Card Accountability Responsibility and Disclosure Act to make many of the schemes employed by credit card companies illegal.

• The Act eliminates the retroactive rate hikes and universal default tactics.
• The teaser rates the banks use to lure you in must be offered for at least six months.
• Rate penalties go away after six months of on-time payments.
• Cardholders now must opt in to have their purchases get approved if they are over the limit – thereby eliminating unintentional over-limit transactions and the accompanying penalties.
• Due dates must be mailed 21 days in advance and all payments are due by 5pm.
• Payment allocation is applied to the highest interest balances first, so it works in the cardholder’s favor.

The Act is a tremendous benefit for cardholders and should eliminate most of the hidden fees they’ve endured for decades. However, you can fully expect credit card companies to work hard at identifying loopholes and new ways to screw their customers. Be sure to check your statements carefully to limit the likelihood of getting caught in their trap.