Consumer Credit Act Advice

The U.S. Credit Card Accountability, Responsibility and Disclosure (CARD) Act was signed into law in 2009. The law is intended to offer cardholders more protections when dealing with credit card companies because it places more limits on interest rate and fee changes. Nonetheless, cardholders shouldn't let down their guard. There are still several ways consumers can be strapped with high fees and high interest rates that boost profits for the credit card industry.

Legislation Loopholes

There are some loopholes in the fee restrictions imposed by the Credit CARD Act. Card issuers generally can't charge penalty fees for late payments that exceed $25, but there are exceptions. Cardholders can be charged late payment fees as high as $35 if one of their last six payments was late. Credit card companies also can raise late payment fees if they can demonstrate that the costs they incur from delinquent accounts justify the higher fees.

Rate Increases

The Credit CARD Act doesn't place a cap on interest rate increases. Therefore, you should pay close attention to any information you receive from your card issuers about changes in their terms. Credit card companies can still raise interest rates at any time on new balances as long as they give their customers 45 days' advance notice. You could cancel your account before a rate increase takes effect. However, if your balance isn't paid in full when the account is closed, the issuer may raise your monthly minimum payment to pay the account off faster.

Additional Fees

Restrictions imposed by the Credit CARD Act have caused some banks to charge more fees to protect their profits. A Wall Street Journal article titled "Don't Look Now, But Here Come the New, New Bank Fees" notes annual fees on credit cards that had been eliminated by some banks have been re-established. Annual fees are charges incurred simply for having a credit card account. The Journal also says some banks have raised fees for transferring a balance from one credit card to another. Balance transfer charges can be flat fees of $3 or more, or they might be a percentage of the transfer. For example, you could pay an extra three percent on the total amount of a balance transferred to another card.

Program Charges

Some credit card issuers are tacking on charges for program enrollments that customers may not know about. People who open new accounts may automatically be enrolled in payment protection insurance plans. Card issuers tout such programs as a benefit for customers if they lose their jobs or become disabled, since the plans allow suspension of finance charges and minimum payments. The Wall Street Journal says the monthly cost for such credit card programs can amount to 80 cents or more per $100 of credit card debt.