Will good credit customers get penalized under the Card Act of 2009?

In recent financial news, it has been suggested good credit customers may get penalized under the Credit Card Act of 2009.

The belief is new credit cards fees will be heaped upon good credit customers to replace the industries’ revenue loss from limits on interest rates and fees.

The Credit Card Act of 2009 contains several key consumer laws that place limits on penalty fees for late payments and over-limit purchases.

Interest rate hikes on outstanding balances have also been curtailed. Additionally, the new law limits the interest rate higher risk credit card customers can be charged.

And, when you factor in the elimination of the universal default clause, it would give the impression credit card companies will be scrambling to find a way to recoup the millions made from fees and interest rate hikes.

The universal default clause allowed a credit card company to raise your interest rate if you were late paying another bill, even if you paid that credit card company on time.

You could see a rise in interest rate if you were late paying anything from another credit card, a personal bank loan, a mortgage, car loan or even a utility bill. It would appear credit card issuers are facing a huge loss of revenue; or, are they?

According to the law firm, Morrison & Foester, “…the new rules are estimated to cost the industry $12 billion annually, and issuers have long warned that customers in good standing could wind up paying the bill.” This would mean you could be penalized for having good credit.

So far, it appears the data is mixed on whether good credit customers will pick up the slack due to limits placed on interest rates and fees. A Pew Charitable Trust survey found:

“…Less than Less than 25 percent of all cards examined had an overlimit fee, which is down from more than 80 percent of cards in July 2009.  Additionally, mandatory arbitration clauses, which can limit a consumer’s right to settle disputes in court, are now found in 10 percent of cards compared to 68 percent in July 2009.” And,

“Predictions that legislation would spawn the growth of new fees have yet to materialize.  There was minimal change in the number of cards that include an annual fee (down 1 percentage point from July 2009 to March 2010).  During that period, the median size of these fees increased from $50 to $59 for banks and from $15 to $25 for credit unions.”

However, the survey also found that many of the bank and credit union cards included interest rates that could increase for late payments and other violations but almost half of those credit card issuers failed to inform the consumer of the actual penalty interest or how much it would go up. Read the entire survey here.

There is no doubt credit card issuers are attempting to recoup loss revenue through other means such as increased cash advance fees, balance transfer fees and even yearly card member fees to good credit customers.

But it is safe to assume good credit customers will not be penalized as most credit card companies are not going to risk losing good customers to other credit card issuers. One of the greatest aspects of having good credit are the  available options, unlike consumers with less than perfect credit.

A good credit customer can always threaten to take their business elsewhere and actually be able to follow through with the threat, and the credit card companies are well aware of this fact.


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