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The Credit CARD Act Works But More Needs to Be Done

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This article was last updated Oct 09, 2017, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

The Credit CARD Act is one of the most sweeping of credit reform laws put into place in recent years. The law places restrictions on lenders and requires them to provide consumers with more time before increases in interest rates. It also helps to protect college students who otherwise victimized by lenders.

Recent Study Indicates It's Working

According to industry researchers including those at the Pew Foundation, the credit card laws passed by the federal government within the past few years are doing a good job to protect consumers. Under the CARD Act, for example, credit card companies have to be more clear and transparent about the fees and charges they impose, and they also have to follow stricter guidelines about billing and interest rates. But many experts agree that still more can and should be done to help ensure safeguards for consumers.

On an NPR radio show devoted to personal finance, one researcher suggested that although banks warned that if the CARD Act passed we would see a dramatic increase in annual fees on credit cards, that didn't happen. Annual fees did not generally increase, and neither did more card companies start requiring these yearly membership fees. Banks increased ?fees on ATM transactions or checking accounts, and regulators may need to keep closing loopholes and forcing banks to stop charging outlandish fees on any of their various financial products.

Are Teaser Rates Okay?

One area that could use improvement and more oversight may be in regard to "teaser rates" or those popular zero or low interest credit card offers. While customers love them, banks count on the fact that the majority of people who accept these discount teaser rate offers are going to carry a debt balance past the expiration date on the introductory offer. That gives the bank to then charge high interest rates. In effect what happens is that the introductory rate really becomes a type of deferred or delayed payment loan. That's fine, as long as the average cardholder understand the math.

Use Credit Wisely – Don't Wait for Laws to Change

While the Credit CARD Act is powerful and many believe changes are still necessary, today's consumer needs to do more than just sit back and wait for those laws to change. Rather, be wise about the offers you accept. These tips can help.

  • If you do choose a zero percent intro offer, know what the interest rate is after that term before you agree.
  • When using balance transfers, do so with a surefire plan to pay off the balance prior to the intro period expiring.
  • There's nothing better than low interest credit cards. This is the simplest way to keep costs down, aside from paying off your balance in full each month.

The Credit CARD Act may need some polishing, but using credit wisely is your job. Find the right card and use it properly to cut into the costs.

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