How CARD Act Will Affect Your Credit Card

Thursday, April 8, 2010, AM | 10 Comments

Because of the CARD Act, banks and other financial institutions will place restrictions on your credit card. Some credit cards will be affected more than others. More and more issuers would gradually realize that they can’t make more money with all sorts of perks that were offered to their customers for 20 plus years.

Those days are gone. Now, it depends what kind of credit habit and credit history you have. Folks with bad credit history will definitely be affected more than others.

A short analysis

At a minimum, two areas come to mind with more restrictions: 1) higher interest rate and 2) hefty annual fees. Both can cut you down financially like the two sharp edges of a sword if you are not careful.

  • Folks with bad credit history

    These folks will see higher interest rate on their cards plus a raised annual fee even though CARD Act is meant to blunt both sharp edges of the sword. Unless a Congressional agency, created for the sole purpose of protecting Americans, monitors the industry’s behavior, the old ways of suffocating the public will creep into the credit market again.

  • Folks transferring balance

    So far, when you wanted to transfer balance to another card, the first year or so you would get even zero percent interest rate. Then after that period, the credit card issuer would strike you financially with both edges of the sharpest blade they could find.

    Now how would they make money if the CARD Act will try to blunt their strike each step of the way like it is supposed to? You are going to see a higher rate and a shorter introductory term. No matter how you slice and dice it, they will slice and dice you a lot more, put you on a golden plate and present your financial head to the bankruptcy court.

  • Folks using debt cards

    Finance experts would tell you that banks made very little money with debit cards. But in reality, one report last year said the banks and other such institutions made more than $8 billion the previous year simply because the consumers did not check their checking account balance and they overdraft[ed] their accounts. As we all know, the banks charge $35 for overdraft. For the banks, debit card is a cash cow.

In a Nutshell
In the long run, you the consumer can win but only if you use your credit card wisely and just in general live within your means so that you can be debt free for the rest of your life.

On the outset, some perks will be presented to you with beautifully crafted words. But you and only you can prevent yourself into stepping into deeper debt shit so that you can help live and enjoy life with your family without financial worries.

All you have to do is be educated about the CARD Act, take sensible steps in your financial life and be skeptical of the credit offers from banks and others. More importantly, read the fine prints and as they say read between the lines.

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