Balance Transfer Fees, High Interest Rates: Don't Fault the CARD Act
Two common complaints about the new credit card law, which celebrated its one-year anniversary on Feb. 22, 2011, are that it led to the extinction of 0% balance transfer credit cards with no fee and that it caused increased interest rates. One of these complaints is rooted in fact, but neither serves as a valid criticism of the law.
Yes, the CARD Act’s passage effectively signaled the beginning of the end for credit cards that offered 0% APR on balance transfers and had no fee for the service. However, no one really has the right to complain about this.
Credit card companies were able to offer such an attractive combination of features because the money they lost on people who took full advantage of these free balance transfers was more than made up for by the revenue gained from those who didn’t. Prior to the CARD Act, credit card companies were looking for whatever excuse they could find take away consumers’ 0% rates. For instance, it would not be uncommon for someone to lose their 0% rate as a result of being one day late on a payment or charging $5 over their credit limits.
Now, however, increased interest rates cannot be applied to existing balances unless a consumer is at least 60 days delinquent, making it much more difficult for credit card companies to continue these hair-trigger re-pricing practices.
It’s simply not financially viable for credit card companies to offer free balances transfers unless there’s another side to the coin. Once the ability to easily make money on suddenly high interest rates was taken away, so too were most free balance transfer offers. In fact, the Discover More – No Balance Transfer Fee is the only one that exists today.
However, people shouldn’t be mad because the system under which some consumers enjoyed a free ride subsidized by the misfortune of others truly wasn’t fair. No one welcomes higher costs, but if you’re one of the people who benefitted from free balance transfers, as I am, just think about why you were able to do so and realize that things are now for the better. Everyone now pays for their own use.
While this change in the financial landscape can be attributed to the CARD Act, high interest rates cannot be. It’s true that interest rates have risen since the CARD Act was implemented, but a CardHub.com Interest Rate Study proves that this increase occurred as a result of economic pressures typical of a recession, not because of any law.
A Simple Method Of Consolidating Credit Card Debt | - 0 - Money ...
Debt can easily get out of control if a person is not diligent. The good news is that debt can be managed. The most troublesome type of debt for consumers today is credit card debt.Millions of credit card customers are searching for a means to manage their financial responsibilities. Often debt management is found through credit card consolidation.
Credit card debt consolidation can often create more of a financial burden if you do not use a careful approach.It is very important that you have your credit card accounts under control and are not over extended credit wise. One common solution to consolidate credit card debt is by transferring a high interest rate card balance to a credit card that has a lower interest rate. As an example, maybe you have several credit cards that have a balance of a few hundred to a few thousand dollars and a high rate of anywhere from 17 to 20 percent or more. A huge amount of money could be saved yearly by simply moving those higher balances to the card that has a lower interest rate.
Perhaps you have a card that has an interest rate of 13.5 percent or lower.It may be possible to transfer the higher interest card balance to the lower interest rate card. With a balance that is currently charged several points higher you would see a significant savings by transferring your higher balance to a newer lower interest rate card.This would be a positive method to consolidate credit card debt. But wait just a minute. There are a number of downfalls that need to be addressed before considering this sort of credit card debt consolidation. Before you transfer any balances please consider the following pitfalls: The new card that you are considering may be offering a teaser rate and at some point in the future that teaser rate will expire and become a higher interest rate.
Read the fine print terms of the new card so that you are aware of exactly what the new higher rate will be in the future and do not suffer any set backs to your debt consolidation plan. The “empty card” syndrome: If you have decided that moving your high rate balance to a lower rate card will help you to consolidate your credit card debt, make sure you have a plan for that new zero balance card. Do not become a victim of the “empty card” syndrome. Many people will find themselves back to square one and in debt by charging again on their zero balance card only because of the convenience and the zero balance. Do not let your mind trick you into this type of mentality,you will only be struggling with more debt and fail in your debt consolidation plan. One option is to make that card disappear from site as you are less likely to use it, if it is not easily accessible.