How the Credit CARD Act Affects You
The impact of the Credit CARD Act depends on the type of credit card you carry. At the same time, the economic slowdown has forced card issuers to rethink their strategies. As a result, almost every credit card user will notice some changes.
Below is a breakdown of how different card types are affected.
Credit Cards for Bad Credit
The CARD Act limits excessive fees. Because of this, issuers can no longer easily offer “fee harvesting” cards. These cards once charged high upfront fees with very low credit limits. Now, options for people with bad credit are more restricted.
Balance Transfer Credit Cards
Previously, balance transfer cards offered very low interest rates for long periods. However, those long promotional periods are becoming rare.
While teaser rates still exist, they are less generous than before. Therefore, consumers should read the fine print carefully.
Business Credit Cards
Business credit cards remain mostly unaffected by the CARD Act. None of the Act’s major provisions apply to these cards. For now, small business owners will not see major changes.
Debit Cards and Overdraft Fees
Debit cards have never been big profit makers for banks. Now, new overdraft rules further reduce bank income. Starting July 2010, customers must opt in to overdraft protection. Because of this, banks may introduce annual debit card fees. These fees could range from $20 to $30 per year.
Gas Cards
Gas cards are indirectly affected by the CARD Act. Most gas cards are co-branded with banks and oil companies. As banks adjust their policies, rewards and terms may change. However, these cards will still offer fuel-related benefits.
Low-Interest Credit Cards
Low-interest cards may soon become harder to obtain. Interest rates are likely to rise over time. In addition, issuers will approve fewer applicants. Only borrowers with strong credit profiles may qualify.
Prepaid and Gift Cards
The CARD Act improves transparency for prepaid cards. Certain fees must now be disclosed before purchase. Also, prepaid and gift cards cannot expire for at least five years. These rules took effect on August 22, 2010.
Student Credit Cards
Credit card marketing on college campuses has changed completely. Issuers can no longer offer gifts to attract students. Additionally, applicants under 21 must prove income or have a co-signer. This change encourages responsible borrowing at an early age.
