Posts Tagged ‘cardholders’

A final rule was laid out Tuesday aimed at protecting consumers from misleading and predatory credit card practices.

The US Federal Reserve has set forth a final rule to implement provisions of the Credit Card Act, which was enacted in May last year that will enhance previous regulations barring unfair practices, such as abrupt interest rate increases, and improving disclosures to cardholders.

“The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card accounts,” Federal Reserve Governor Elizabeth Duke said in a statement.

The rule prohibits interest rate increases one year after the credit card account is opened. After the initial year, issuers should give cardholders a 45-day notice before increasing rates.

This rule also bans hikes applicable to existing balances, such those of cardholders who are behind in payments.

It also requires creditors to first seek a cardholder’s approval before charging them for transactions that exceed their credit limit.

It also puts a cap on exorbitant fees associated with subprime accounts.

In addition, the rule prohibits “two-cycle” billing, which allows creditors to impose additional interest charges.

Under the rule, creditors must give uniform due dates to consumers each month, eliminating confusing cut-off times that lead to missed payments and jacked up rates. Companies who have complied with the rule have started mailing bills to customers 21 days before the due date, which has increased from 14 previously.

“These rules — the most comprehensive ever seen — herald a new era for America’s credit card customers,” Kenneth Clayton of the American Bankers Association told the Associated Press. “It really does put consumers in the driver’s seat,” he said.

The rule helps customers settle credit card dues faster and even more cheaply, as payments are first applied to highest interest-rate balances.

This landmark ruling is part of the Feds’ second implementation of the 2009 Credit Card Act. The first came in August last year, three months after the act was signed into law by President Obama in May 2009. Obama called the law’s provisions as “common sense” reforms made to “protect consumers.”

Initial amendments to Feds’ first adopted regulations in December 2008 took effect on August 20, 2009.

These provisions included one that bars creditors from issuing cards to those under the age of 21 unless they provide documented proof of their ability to pay. If not, a signature of a parent or any other responsible co-signer is required.

Creditors must comply with the Fed ruling by February 22.

Some of the US’ leading credit card issuers include American Express, JP Morgan Chase, Citigroup, Bank of America, and Capital One Financial.

Writer: Gerry

In a bid to protect consumers from fluctuations in credit card interest rates, the Federal Reserve has issued new credit card rules.

Beginning February 22, credit card companies can no longer increase their rates within the first year after the account is opened. These companies are then required to give credit card holders a 45-day notification if they are planning to increase their rates after the first year.

According to American Banker’s Association, these new rules are the most comprehensive ever implemented and can really help consumers to manage their credit card debt.

Under the new rules, credit card providers can only charge fees on the credit card holder for transactions that exceed his or her credit limit after obtaining the consumer’s consent. Another notable provision in the law is that the companies will be thwarted to issue credit cards to individuals under 21 unless they have the financial capability to repay their debts or a co-signer can make the required payments if the cardholder failed to do so.

Confusing billing processes and cut-off periods can be prevented as due dates will be the same month after month. Initial payments will be applied to balances with the highest interest rates, which will help cardholders pay their debts easier and at a cheaper cost.

Consumers will be glad to know that there will be no rate increases for their existing credit balance – except when they fail to meet their payment 60 days after the due date.

As these new rules are set to be implemented next month, some lenders are already pushing through rate increases this month, getting the ire of the Congress who passed the legislation and was signed by President Barack Obama in 2009. Other provisions of the law are said to be implemented later this year.

Writer: Rowell

Nowadays, as the online banking system continues to gain acceptance and much improvement, many consumers are taking advantage of the system and are shifting from the use of cash and checks to debit cards. Basically, a debit card is a plastic card issued to customers by banks and debit card companies. It allows the cardholder to purchase products or services directly from their savings account that come from checking machines. Funds used are prepaid and exists in the bank account prior to any transaction made using the card. Thus, why are debit cards important to cardholders and to the companies who provide them?

Debit cards, which are also known as bank card or check card, are significant when making purchases or while traveling. Having debit cards on hand means that buyers do not have to bring huge amounts of cash in their pockets since numerous of establishments accept these cards as mode of payment. Almost all stores like shopping centers, restaurants, hotels, airlines, and malls have made their Point-of-Sale terminals capable of receiving payment from prepaid cards. For a customer, it is easier to swipe than to count cash and coins. Also, internet shoppers who buy goods online use debit cards too. Usually, businesses who sell through the internet and delivers by mail only accepts debit or credit cards for fees.

Further, for people who pay their bills through an automated teller machine (ATM), a debit card is vital. By just inserting the card in the machine and pressing the amount to be paid, the payee saves time and effort compared to falling in line to pay to the teller. The remaining amount of money can be checked online or mobile phone. Another importance of debit cards is that they are used to withdraw cash from ATMs. Consumers who use debits cards can easily track their expenses since these are listed in their bank statements.

Meanwhile, debit cards are essential as well for companies who issue them. This is because the use of their cards brings various business opportunities. They earn from the charge, usually very low priced, when a person avails of their service. These companies continuously look for improvements, options, and rewards to be given to subscribers. Moreover, a client who is satisfied will likely recommend the card to people they knew.

Therefore, debit cards are really important to lifestyle of people because of the convenience and speed they provide.

Writer: Cristina

United States House Financial Services has approved a proposed bill expediting the implementation of CARD Reform for Consumers Act of 2009, a law which overhauls the credit system that is supposed to be carried out on February 2010, on December this year.

On the other hand, the HR 3639, the Expedited CARD Reform for Consumers Act of 2009, does not apply to prepaid gift cards – which are already printed and will be out in the market soon, and small credit card issuers – which control less than 2 million cardholder accounts. The credit reform law will be effectively implemented on small market such as these on February 22, 2010.

Meanwhile, Senate Banking Committee Chairman Sen. Chris Dodd recommended the immediate termination of increased interest rates set by the card issuers.

These actions by both legislative houses were prompted by the continued increase of rates for 700 million credit card holders.

Comparing last year’s rates, cardholders complained that they have been paying four times higher in interest rates due to charges on late payment and other additional fees.

In a recent study conducted by Pew Charitable Trust, a non-government organization which is committed to serve the people by improving public policy through information dissemination, they found out that contracts for almost 400 cards, issued by banks and 12 largest credit companies, allow card issuers to raise interest rates, apply penalty fees for late payments or over-limit transactions.

These terms are the same policies prohibited under the CARD Reform Act, which was signed into law by President Barack Obama early this year. The Congress has divided the implementation of the law into two phases to give credit card companies more time to change their policies. The first phase, which was implemented last August, entitles the consumers a 45-day notice from the card companies and banks before changing their interest rates. The second and last phase, which is supposedly carried out next year, bans the card issuers to increase their interest rates on existing balances. The law also gives the consumers five years to pay the loan that has fixed interest.

However, instead of adjusting their policies to meet the reform act requirements, the banks, which control more than 90 percent of credit cards in the marker, and credit card companies have changed and rewrote contracts to their advantage. As a result, credit card issuers have free-hands in increasing their interest rates and eventually raking more profits at the expense of their consumers.

In fact, the credit card companies have started increasing the median annual rate in December 2008 and July this year by two percent or more – one of the measures that will cover the projected losses due to continued climbing of unemployment rate and the implementation of CARD Reform Act.

Other measures adopted by banks and credit card companies are re-pricing program which is forcefully employed to its existing consumers, some of them have cut their rewards programs, and applying additional charges for annual fees, between $29 to $99.

Writer: Gani