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Customers lose money to credit card issuers in spite of new laws

[Tuesday, January 4th, 2011]

Credit card issuers haven’t become the massive profit making machines that they are overnight. They constantly keep coming up with new kinds of rules and new types of fees. It isn’t very long since the Credit Card Accountability Responsibility and Disclosure Act was passed. But credit card issuers have already started coming up with many devious ways to charge money on the credit card customers. Whether it is in raising the new default rates or lowering the credit limits, credit card customers, especially those who do not have an excellent credit rating are having a hard time.

You can place a tab on certain type of fees. However many credit card issuers like the Discover, Bank of America, Citigroup and J Morgan Chase have hiked the minimum amounts of payment on some customer accounts. This is to hike the late penalties. The banks have found a way wherein a sudden rise in the minimum payment can increase the chance of borrowers falling late on the payments. That is only one of the sneaky ways. A few credit card issuers are aggressive as far as embracing new prepaid cards are concerned. These cards are known to be exempted from the new rules and they carry fees which are sky high.

Lowering interest rates by simply calling to complain was standard previously, but it isn’t easy any more at all. The new credit card limits the changing of interest rates and this is how credit card issuers are using the new rule. The new fees levied are worse than the excessive interest rates. HSBC and Discover for example, are pushing insurance which promises to take care of minimum payments for those who fall under financial burdens. They are then imposing a greater fee without even seeking the permission of the credit card user. Minimum payments have been raised by other issuers too like the Bank of America and JP Morgan Chase. This is targeting a strategy to enhance the late fees.

Credit card issuers which have been hurt with an estimated 11 billion dollar loss due to the new rules are reviving the annual fee, increasing the balance transfer fees, the interchange fee as well as the cash advance fees. Professional cards which are not under the credit card reforms are also being pushed by the credit card issuers. Many card issuers have shortened the billing cycles as well.

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