February 11 2010|01.10 PM UTC

Angelica Nierras

3 Ways to Prepare for the CARD Act

Category: Credit, Personal FinanceTags: , , ,

On February 22, 2010, the Credit Card Accountability, Responsibility, and Disclosure Act, better known as CARD, will go into effect and consumers can start breathing a little easier as some of the worst abuses in the industry are curtailed. Don’t start celebrating just yet, though. We predict that issuers are going to get creative seeking profits elsewhere, so it’s important to take the time to understand what changes may be coming in a few weeks — and how to protect yourself now.

Below find our predictions for how card issuers will find new profits in the days after the legislation takes effect, and also three suggestions for staying ahead.

1. More cards with annual fees

Currently, only about 20% of credit cards in the United States charge an annual fee. Expect that percentage to rise after CARD goes into effect as it’s the easiest way for issuers to recoup their losses. Bank of America was way ahead of the game in this respect, as it announced in October 2009 that a small percentage of cardholders (the ones they have trouble making money on, i.e. those with good credit) can expect to see annual fees ranging from $29 to $99 starting in, you guessed it, February 2010.Chase has also started experimenting with annual fee cards, but unlike Bank of America, will also offer more rewards. For instance, the popular Chase Sapphire card, which has no annual fee, was reincarnated as the new Chase Sapphire Preferred card. The Sapphire Preferred charges an $85 annual fee but also provides for a better rewards points and miles system, including a 7% annual points dividend that helps you increase your points. How do you know which is better for you? That’s the question that drives our company.

Safeguard yourself now by staying on top of the ever-changing rates, rewards, and payment policies. BillShrink helps you find the best credit card for your lifestyle by calculating the total cost of ownership for each card, including fees and rewards. Remember, don’t always judge a card by its fee: that $79 annual fee could save you thousands in interest rates if you happen to carry a large existing balance.

2. The rise of sneaky fees

Customers can expect to see a hefty rise in fees like cash advance and foreign transaction fees, as well as newly-invented fees. For instance, Fifth Third Bank has introduced a $19 “inactivity fee” on credit cards that have not been used in a year. In other words, if you had charged a random ten dollars on the card once in the whole year, you would have saved $9. Citi has also started something called the “reinstatement fee,” which requires you fork over money to access your own points that have been “made unavailable” because of a late payment. (Even more proof that late payments cause all sorts of unnecessary headaches.) While the reinstatement fee is currently $0, it’s a very good bet that number will go up after the CARD Act goes into effect.

Safeguard yourself now by scaling down the number of cards in your wallet. BillShrink CEO Peter Pham recommends that users “consolidate your debt into one or two cards that you use on a regular basis.” This way you’ll be able to avoid an inactivity fee and be better able to keep track of payments, fees, and all the other complicated fine print. Also, keep an eye out for any “processing fees” tacked onto your bill, which may be charges for paper statements, customer service, and more. While the CARD Act eliminated fees for paying your bill over the phone, it doesn’t mean other “convenience” fees couldn’t spring up in its place.

3. Prediction: Balance transfer fees going up

If you don’t like the terms you get with your current credit card, an excellent way out is to transfer your existing balance elsewhere. However, the cost of doing so is rapidly rising. A year ago, balance transfer fees hovered at 3%. That number has inched up and up. Bank of America charges a 4% balance transfer fee on the Asiana card and Alaska Airlines Visa Signature card. Chase charges a current balance transfer fee of 5% on the Chase Freedom Card. While 5% may seem exorbitant now, there’s no telling where these rates are heading in the future.

Safeguard yourself now by taking advantage of the current low cost of balance transfer. If you are carrying a balance and paying a hefty amount on interest, the time to shop around is now.

At the end of the day, no one can make perfect predictions for what the credit card industry will look like a year from now. Even the most diligent of cardholders may be caught unaware, which is why it is more important than ever to use trusted tools that consistently protect you. BillShrink monitors all changes in the credit card marketplace and alerts you when your current credit card starts giving you the shaft.

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{ 26 comments… read them below or add one }

Chicago liposuction February 11, 2010 at 11:49 pm

Well since people are complaining about the interest rates being too obscenely high, then they must find other ways to make there money.

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29per cent rate February 12, 2010 at 12:35 pm

Yes we do complain about high rates. Mine just went from 22-24 percent to 29.99 percent! WTH… We pay every month in full. Citi has now started saying we cant pay in full over the phone!! LOL Nice try. We now pay via internet.
29.99 when they are being subsidized by government and my taxes pay their salary is not right.
As soon as a card is available that has american miles I am off citi like a bad habit. By the way I run 1-15k a month on my card, and have great credit. My goal is to be OFF cards and no mortgage ASAP. Cash is king…or maybe gold, the USD is toast also.

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LTParis February 15, 2010 at 12:15 pm

Just goes to show that the CC companies to fight tooth and nail to milk every dollar away from the consumer into their coffers. BoA terminated both my Line of Credit and Credit card last year because they considered me “high risk” although I always paid on time and then some.

I fell into the credit trap like so many others. But we are doing everything in our power to take away the power of the big banks. Luckily I was able to open accounts up at Navy FCU so I have since close my Bank of America checking and savings accounts. Hopefully in the next year I can pay off the last remaining business with them.

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Trainerpack February 15, 2010 at 12:30 pm

Ridiculous!
The only one I use is my Amex for points. Everything else is worthless to me.

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Anonymous February 15, 2010 at 12:40 pm

Yeah, it’s a shame Congress gave these card companies a WINDOW of time in which to jack up everyone’s rates. My cards went from 9% to 20%. The reason stated was “To maintain profitability”.

F U Credit cards.

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Schwinn February 15, 2010 at 12:55 pm

People always say that they need to do this to make money. You do realize that a few percent of EVERY TRANSACTION is charged to the vendor of the product? Don’t think they aren’t making money on this… they already are making money on every transaction you make! And now they’ll add annual fees. Nice. :/

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ClaudeBee February 15, 2010 at 1:00 pm

After 25 years being with Citi…they moved from 17% to 22.9 and at the same time offered additional promotions at 2.9%

There is no justification for their marketing these low ball incentives on new debt while increasing their existing debt to the same up to 22-25%.

I will never do business with Citi again. They are greedy and unethical. They should not be bailed out and the public should not give them any business. Buyer beware. Pass it along.

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Lewis February 15, 2010 at 1:25 pm

Like everything else (except our Pay) is going up; and let
us not forget that the Fed’s are gearing up to commence
raising rates soon. Truly, we are living in very unusual
times!

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Kel/y_H February 15, 2010 at 2:12 pm

I’m a fan of number 4: cut up your credit cards and pay them off while you still can.

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Lance February 15, 2010 at 5:33 pm

I paid my BofA card off every month and they still slashed my credit in half. Well guess what? I switched to using a PayPal debit card that I can fill from my bank account for free and I get cash back on. Also, I switched to a credit union. Screw the big banks.

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Chris M. February 15, 2010 at 6:09 pm

The “golden days” of credit cards are basically over. I would be surprised if there are any truly fixed-rate cards in the future as the Credit CARD Act really doesn’t allow those cards to be profitable. Additionally, there is talk of limiting interchange income (the fee charged to merchants by credit card processors, which is divided between the processor and the issuing FI. There are many who don’t understand that interchange income is just about all that subsidizes the travel points, cash back incentives, and rest of the rewards programs, so if further changes are made, those programs will die off.

I work for a small credit union and felt that, prior to the CARD Act, we treated our members pretty fairly when it came to credit card rates and fees. With this legislation, and the potential legislation coming down the pike, we most likely won’t offer credit cards anymore simply due to the expectations of strong rewards programs coupled with the loss of income to support them. I’m in favor of legislation to restrict usury fees and rates, especially for some of the banks you guys have listed already (i.e. Citi, BofA, Chase, etc.) but these changes impact all FI’s and even those institutions (like ours) who acted responsibly and charged reasonable rates/fees are impacted by these changes.

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Nate Baxley February 15, 2010 at 7:36 pm

Find a no fee card, pay it off every month. Done. There’s no need to tear up your cards, they are basically giving you free monthly loans if you keep paying it off. It’s only people without discipline that need to get rid of their cards. As for the fed raising rates, great. Lock in your mortgage now for the next 30 years, and you’ll finally be able to earn something decent in a savings account. Why can’t we Americans learn to save more?

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Ray February 15, 2010 at 9:40 pm

Citi raised my rate not once but TWICE in the last 18 mos. I’ve never missed a payment, and I do carry a balance (I know.) I wrote letters, called, and submitted requests through their website asking why it was raised and if it could be lowered. All I got was “It’s the cost of doing business rising.” My final letter advised them that I would be closing the account if my rate was not adjusted, and no useful response came. So I’m done with them.

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stan moore February 16, 2010 at 4:58 am

AAA has a “Travel Card” that is a cash card (you give them X amount of money to put on the card) which I think cost you $4.00 and is good for 2 years with no other fee’s. I travel a lot and giving somebody my credit card and they disappear (customer lunch for example)for 10 min’s bothers me. With the AAA travel card your name is not shown on the front of the card, it just said’s “Travel Card” and on the back I sign the bill T Card. Nobody has questioned on that signature in the 2 years I have used the card.

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Cornflower February 16, 2010 at 6:03 am

The Globe and Mail (in Canada the closest thing we have to the NYTimes) put me onto “Enough Bull” in an Op-Ed yesterday! This guy gets it!. Get rid of your debt before all else. Transferring to a lower interest credit card is a stop-gap; do the calculation and add in the transfer fee in the calculation, On Paper so it becomes real dollars that are spent, but get rid of the debt first and foremost.

Here is the article.
http://www.theglobeandmail.com/globe-investor/personal-finance/rrsp/forget-rrsps-until-your-debt-is-paid-off/article1466052/

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Marc February 16, 2010 at 8:10 am

One more reason to go back to good old fashioned cash … you know, the note that is promise of payment that is valued by the government … what? they are technically bankrupt? gehind on their payments? so … what is the little green cottony paper with the governmental promise which i carry worth? … anybody? … ::shirpchirp:: … crickets … damn …

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Todd February 16, 2010 at 8:39 am

Fire your bank!

Join a Federal Credit Union. USAA is FANTASTIC if you can get in.

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chris February 16, 2010 at 9:11 am

One thing that is worth doing is if you’re established with your cc company, call them up and explain your situation and ask them to lower your rates. I think they can do this based on your credit score.

I told mine I had a few expenditures coming up since I was getting a new job and would appreciate it if I could get a lower rate to pay off what debt I owed and to make room for more spending. I went from 15 down to 8.

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FAIL February 16, 2010 at 9:34 am

My card jacked up my rate to 25%, they lost a customer for life in a 10 minute phone call.

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Dan February 16, 2010 at 10:09 am

Wow, what timing. I just shredded by BofA MasterCard now that I have a brand new Visa from my credit union. Looks like I just missed that annual fee.

Join a credit union, folks, where your good credit rating makes a difference. (Not to brag, but mine enabled me to get a 7.99% APR on the new card! And BoA would *never* dream of offering me that.)

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Brad February 16, 2010 at 11:14 am

I’d love to be able to do a balance transfer from the card that got jacked up to 27.24%, but my other 2 cards won’t do a transfer. Their reasoning? The upcoming deadline on the 22nd.

I also recently had my student loan company make a mistake and they reported 2 late payments to the credit agencies. Mind you, these were the loan company’s fault, not mine. Those 2 reports triggered an avalanche of reduced credit limits, jacked up APRs and a badly damaged credit score. All because the credit card companies are jumping at any and all reasons to gain an advantage over this new legislation. Seems like fraud of some sort to me. Now the companies cite a poor balance to credit-limit ratio as a reason to not lower APRs or increase limits – all because someone else made an error. Something seems really wrong about this. Am I alone here?

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Dennis February 16, 2010 at 1:33 pm

Credit cards are UN-SECURED DEBIT. I suggest that you look at Companies that can consolidate, reduce interest, and reduce the amount you owe through negotiation. Contact a financial attorney for help. Remember UN-SECURE DEBIT does NOT have to be repaid if you are retired and not collecting a regular paycheck (employed). They cannot garnish your retirement income (ask your Attorney). Your credit score may suffer, but your debit will go away…fast.. Another way out snd screw these credit card companies. I did it, and have no regrets!!!

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Reilbost February 16, 2010 at 1:41 pm

I flipped out recently when I paid FOUR HOURS late on a card–ATT Universal–that I had never been late on ONCE in seven years … they didn’t charge a late fee when I complained, but they did put me on warning that if I was “late” one more time in the next year, they’d jack my rate up to 30% (from 13%–also a jackup from the previous 9%).

I said forget it, canceled my card, and told them I’d never do business with them again. Then, just this weekend, I was able to pay off my entire balance, so now I only have one card, period. These companies’ true colors are showing!!

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Dr. Dean February 16, 2010 at 6:33 pm

If credit card companies cease making money, they go out of business. In terms of profit margin, tort attorneys take much more of their customers/clients money than do credit card companies. Politicians take far more than both put together…

Credit cards can be a good thing. I have a Discover card that refunds me about $700 per year back to me based on my purchases (about 1%). I use it for everything: paying bills, groceries, sundries, restaurants and fast food.

Most importantly, I pay it off every single month.

I use the card instead of cash and, after I deduct the card’s yearly fee (~$70), I net more than $600 discount over what I’d have paid in actual cash for my purchases. I get the convenience, purchase protection and safety of the card for free.

However, with CARD our *wonderful* government is going to start taking money out my pocket and that of those like me to ‘save or create’ money in the pockets of scofflaws, late payers and those who can’t manage a credit card.

Creative redistribution of wealth…

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George February 16, 2010 at 10:35 pm

Notice the advertisement for the Visa Black Card with a $495 annual fee. Who would be crazy enough to pay that for a credit card.

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AZ Cojones February 17, 2010 at 9:50 am

It is wonderful to see how this publically subsidized industry continues to mistreat it customers. I guess if you don’t receive a government subsidy, mistreating your customers is life threatening to a private and legal business.

When these bloated and mismanaged companies are finally shown the door by the financial consumers of America, let their filthy carcass of an organization and industry roast in capitalism hell. The bell of bankruptcy tolls for these misguided, mismanageed, and manipulative credit organizations. “Do you hear that sound Credit Card companies of the world? That is the sound of your inevitability!” Failure is soon to be your option and we consumers hope to watch with unmitigated glee to your demise. Good riddance all you whale fecal mattered credit card organizations.

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