Following the implementation of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act on 22nd February 2010, there have been effects on the consumers and the cardholders. Whereas critics argue that the CARD Act may have cost the consumer a lot of money, in some way, there seems to be some relief to the same consumer. In regard to cost implication, there appears to be a notable increase in interest rates.
According to Cardratings.com study, there has been an increase in the annual percentage rates by averagely 2.1% from the end of 2008 to 2011 on new credit cards. Another cost element that has been witnessed is the ballooning of balance transfer fees. There is an increased trend in balance transfer as cardholders servicing credit card debts seek for lower APRs on their balance.
However, there seems to be an increase in the fees charged by card issuers on balance transfer. Card issuers have shifted from putting a cap on the maximum credit card balance transfer fee to charging a fee based on the balance being transferred. At the end of 2008, it was estimated that about 31% credit card offers were putting a cap on the card transfer fees but as at 2013, this percentage has significantly gone down and it is at 4 percent.
On the other hand, the percentages charged as fees on the amount being transferred has risen by 1.2 percent to settle at 3.3% compared to 2.1% in late 2008. What this means is that if you were transferring a credit card balance of 20,000 in 2008, it would have averagely cost you about $420. However, if you are transferring the same amount today, it would cost you a fee of about $660.
Despite these cost effects to the card holders, there are some benefits which these consumers are enjoying. One, there are fewer late fees and this is contributed to by the fact that the CARD Act made it a requirement by the card issuers to standardize billing cycles. Consumers are given not less than 21 days to settle their credit card bill.
From the effect of the standardization of billing cycles, the Consumer Financial Protection Bureau established out that there was a drop in monthly late fees by $474 million in the period between Jan and Nov 2010. What this means is that consumers could be paying less in late fees attached to their credit cards in the tune of $5 billion. This is certainly a big reduction in the amount of money that was being lost by the card holders in form of late fees.
Another benefit which has been noted is existence of lower over-the-limit-fees. Card issuers charge a fee when you clock and exceed the limit set for your credit card spending. Credit card issuers have made it an optional choice for you to exceed your set credit limit. This means that you willingly agree that you will be charged a certain amount of fee when you exceed the set credit limit.
Nonetheless, the fees have become quite competitive and are at lower levels compared to the period before the CARD Act was brought to the floor. According to observations made by Cardratings.com, the over-the-limit fees have now dropped to averagely about $14 compared to $33 in the period before the Act i.e. late 2008.
Last but not least, the CARD Act has led to fewer over-the-limit fees. Since the enactment and implementation of the CARD Act, many credit card companies stopped charging the over-the-limit fees because it was banned unless a cardholder willingly opts to such a program. This resulted to about 40% of credit cards with the opt-in program compared to about 95% of credit cards which were featuring the over-the-limit fees.
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