The highly publicized CARD act that passed earlier this summer as a result of credit card companies treating their customers in unfair and sometimes abusive ways have done a lot to streamline the rules governing the credit card industry. However, many cardholders seem to think that this new legislation completely handcuffs card issuers into never changing the rules, terms, or fees associated with a credit card and this simply is not the case. There are still several ways card issuers can alter terms and conditions surrounding customer credit cards. The answers can usually be found in the fine print, but here are several factors that can still be controlled by credit card companies.
– Card Companies Can Change Rewards Programs: Reward programs are a substantial cost for credit card companies and with more customers defaulting on their payments, some reward programs are going by the wayside. Chase, American Express, and Capital One have already announced changes that negatively impact their reward programs, and many companies will probably do the same in the coming months.
– Card Companies Can Demand a Larger Minimum Payment: The industry standard has been a minimum payment that is 2% of the outstanding balance, but now that many issuers of credit cards are struggling to collect payments, some companies, including Chase, have increased the minimum payment amount to 5% of the outstanding balance. Many issuers will help you with a customized payment plan if you’re having trouble making minimum payments.
– Card Companies Can Change Your Fixed Rate to a Variable Rate: One of the hooks that card companies have historically used to gather new customers has been to promise a low, fixed rate for the life of the credit line. The CARD act requires issuers to keep rates fixed for a year for new customers unless the customer fails to make a payment, but after that the company has the rate to make the interest rate variable.
– Card Companies Can Reduce Your Credit Line: It’s estimated that 58 million people had their credit limit cut between April 2008 and April 2009. Issuers are within their rights to change credit lines and as they try to rein in risk in a lagging economy, many cardholders are finding that their credit lines have been cut in half. This can have an impact on your credit score so it’s important to be aware of any changes to your available line of credit.
– Card Companies Can Close Your Account: This is basic risk management for credit card issuers. Fewer cardholders may mean less interest revenue and profit, but it also means fewer people failing to make payments. It’s a good idea to make at least one purchase with your credit card each month because inactivity is one of the leading reasons that an issuer will cancel open credit lines right now.