Last year Congress passed the CARD (Credit Card Accountability, Responsibility and Disclosure) Act to protect consumers from usurious rates and unfriendly terms by credit card issuers. The first phase of the legislation took effect last August. It required statements for open-ended loans to be sent at least three weeks prior to the due date, giving people ample time to make their payment before it became due. A second phase took effect February 22 that required credit card providers give 45 days notice before increasing interest rates and in most situations banned credit card companies from raising interest rates on existing balances. These restrictions made credit card companies scurry to increase rates, change terms, raise minimum payments, and develop new crazy fees to charge.
As one example, a long time credit union member received a letter from her credit card company informing her of a new annual $60 fee. She had carried this card for nearly twenty years, always made payments on time, and usually paid the balance in full. Her reward for being a good customer? An annual $60 fee. This is the same place that previously lowered her credit limit and increased her interest rate. I think the old adage of “with friends like these who needs enemies?” is appropriate here. What did this member do? The same thing I would encourage you to do if you receive one of these notices – close your account promptly and apply for an MCU Visa Credit Card. At MCU we do not charge an annual fee for our card nor do we arbitrarily lower credit limits on our members’ cards.
Credit card companies are also finding creative ways to circumvent rules on raising consumer interest rates. The CARD Act prohibits issuers from increasing interest rates on existing balances. However, 12 months after receiving your card, credit card companies can raise interest rates on your future purchases provided you are given a 45-day notice. Sure, you can refuse the new rate but you also must stop using the card and pay it off over 5 years at the old rate. At Members Credit Union we don’t believe in bending the rules like Uri Geller’s spoons just so we can charge a higher rate. With our card you pay the same rate on your entire balance, unlike other credit card companies that may charge one rate for cash advances, another rate for purchases made before a certain date, and even another rate for purchases made at a later date. You need a math degree from MIT to understand it all!
The CARD Act does allow for credit card companies to raise the interest rate on customers who are 60 or more days past due. To me this is kind of like kicking a man when he is already down. At MCU we do not increase the interest rate on those members who have fallen behind on their payments. What is the point of raising interest rates on someone who is already having financial troubles?
So what should you do with your current credit card? Cut the card in half, run it through your shredder and call your credit card company to close the account. Then call someone you know and trust that offers a credit card with a low rate, no annual fees, and no cash advance or low balance fees – your local Members Credit Union.