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Guess How Much Money the Credit CARD Act Has Saved ConsumersJanuary 14, 2016
Have you experienced a marked decrease in your credit card bills since 2011? If yes, you are not alone. From 2011 to 2014, credit card holders have seen a reduction in credit card related fees to the tune of nearly $20 billion!
This phenomenon didn’t really happen on its own. It is an effect of the Credit Card Accountability Responsibility and Disclosure Act of 2009, better known as the Credit CARD Act that was passed in 2009. While the Act went into effect at the start of 2010, the Consumer Financial Protection Bureau (or CFPB) began tracking credit card data and took responsibility for the law in 2011.
According to the CFPB, the CARD Act to date has saved consumers $9 billion in over-limit fees, $7 billion in late fees, and $4 billion in other fees, such as balance transfer and foreign transaction fees. In addition, it has helped credit to become more available – and also led to an increase in the number of new accounts.
The Credit Card Accountability Responsibility and Disclosure Act put an end to many practices that infuriated customers. Before the CARD Act, consumers would often get hit with late fees for payments received after 8 a.m. on the due date, and be liable for over-limit fees on transactions that the banks allowed. The CARD Act has created a more fair and transparent market by protecting consumers against unexpected interest rate hikes and other unfair practices.
The following changes have been brought into effect by the Act:
- Earlier, banks could approve transactions even if those charges put the consumer over their credit limits, and then charge $35 or more for going over that limit! Now, for credit card issuers to charge over-limit fees, they must get a consumer’s advanced approval through an “opt-in.”
- Late fees for payments received during the business day of the due date are now prohibited. Also, it is now essential for all penalties to be reasonable – this has resulted in a 20% drop in the amount of the average late fee.
- The CARD Act dramatically reduced or eliminated many other fees, such as cash advance fees, balance transfer fees, foreign transaction fees, and add-on fees – like a charge to pay the bill online or over the phone. For many of these fees, the CARD Act merely required better disclosures, and not elimination. However, more and more cards have eliminated one or more of these to encourage new customer signups.
The amount of credit available has increased by 10% since 2012, to nearly $3.5 trillion as of earlier this year. More than 100 million credit card accounts were opened last year. Credit card accounts have been increasing by 3% a year for the last two years, even though the adult population in the United States is growing by only 1%. Further, the cost of credit overall, including fees and finance charges, is 2 percentage points less than before the CARD Act.
Hold your horses before you get too ecstatic though. When it comes to credit cards, you still need to be wary of the following issues.
- Credit promotions that defer interest are not mandated to follow the same rules about upfront credit card pricing. Hence, these types of accounts may charge consumers higher fees – especially those with lower credit scores.
- Beware of companies that offer subprime credit cards. They charge upfront origination and other fees, and their agreements with consumers may be complicated.
- Card agreements are still cumbersome, with a typical agreement ranging anywhere between 3,000 to 8,000 words.
- Consumers aren’t clearly informed about the details of reward programs until after the application has already been submitted. Even if the terms are available ahead of time, card issuers usually retain the right to change terms whenever they wish to do so.
While credit cards still have certain drawbacks, it cannot be denied that a definite improvement has been brought about by the CARD Act. Credit cards can prove to be a good source of financing for meeting personal requirements.
On the business side, our team at Fund&Grow is busier than ever. We provide an affordable way for small businesses with reasonably good credit to receive from $50,000 to $250,000 credit cards at 0%, with no back-end fees. And we provide a money-back guarantee on services! If you have any questions about our processes, or how we can get $50,000 and $250,000 for you, please do not hesitate to call us at (800) 996-0270 or contact us via email.