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Low Interest Rate Credit Cards – A Thing of the Past?

Are low interest rate credit cards something we will not see again? On February 22, 2010, The Credit Card Accountability Responsibility and Disclosure Act (CARD Act) goes into effect. This new law does provide for a number of benefits to the card user, including new protections. The new law hopes to curb some of the abuses of the credit card industry and since Americans have more than $900 billion worth of revolving debt, most could use it.

One of the most notable changes recently within the industry is the sublet (although some were drastic) increase in credit card interest rates and lower credit limits. Lenders claimed it was necessary to do this, though many of those changes occurred after the announcement of the CARD Act. In either case, you need to know what to expect in the changes coming.

You Do Get Protections

The new protections for card users include the following:

Your bill must be sent to you 21 days before it is due. Anyone under the age of 21 with a card must have an adult cosigner to obtain a credit limit. Lenders must also show the difference in making minimum payments and paying more each month. Lenders are unable to raise your interest rate on existing balances unless you are 60 days late in making payments (though they can raise rates at any time for future charges!) A 45-day warning must be provided if they are raising your interest rates.
What to Watch For

Although some believed that these new laws would in fact help people acquire and keep low interest rate cards; that is not the case. There is no cap on interest rates with this new law.

Another way that the industry will get borrowers is by changing your card from a fixed rate card to a variable rate card. The above requirements for interest rate increases only apply to fixed rate credit cards. This is definitely not a way to get low interest rate cards for most people.

It is also becoming a buyer beware situation. If you apply for a new card, it is critical that you invest some time reading the fine print of that card before accepting it. There is no limitation on the card lenders in terms of creating new fees or penalties. In fact, they can create a new penalty and apply it to your existing card. This may include inactive card fees and even fees for getting a paper statement in the mail.

Does the CARD Act apply to you? If you are like most Americans, you use credit cards and these new laws do affect both your current credit lines as well as those that you may obtain in the future. Credit card users will see differences, if they have not already. However, the best way to protect yourself is to remain knowledgeable about the industry as well as any changes that occur Before you accept your next card, read the fine print and understand the terms. A low interest rate card may still be expensive, especially if there are additional fees.

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