CARD Act of 2009
Think Hard before Opting Back Into Credit Card Account Offers Headed Your Way
As we quickly approach February 22, 2010, deadline for implementation of many aspects of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD), we’ve been seeing some “interesting” marketing ploys by several credit card/banking companies.
CARD makes major changes in the way credit card companies can market, extend and administer credit to new and current cardholders. One CARD stipulation prohibits allowing card holders to go over their credit limit for a fee without their express permission.
Being referred to as an “Opt In Opportunity,” this new provision prevents cardholders from being charged an “over limit” fee (averaging over $39 per month) whenever a purchase pushes their balance beyond their credit limit.
Hypothetically (and surely many times in practice), a card holder could go over their credit limit with something as small as a coffee purchase at a local coffee shop. The cardholder believes they have made $2 or $3 in credit card purchases for the day. In reality, though, their balance has actually grown by over $40 because their creditor has added a $39 over limit fee! And unless the card holder pays down their balance to below their limit, they will be charged the same $39 over limit fee every month.
Cutting down on these fees is a painful pill for the credit card companies to swallow, since over limit, late, and other fees have constituted a significant revenue stream in recent years. Like any imaginative and assertive business, what are they doing to minimize the impact of this law? Getting creative.
Beware if an offer arrives in your mailbox touting the following credit card account “benefits:”
- Convenience: Accidentally going over the credit limit is not a “convenience,” it’s a money-losing the opportunity for the card holder and a money making opportunity for the credit card company.
- Flexibility: Card companies may be flexible with the card holder’s credit limit but are not nearly so flexible when it comes to removing the $39 average over limit fee.
- Emergency: If it’s a true emergency, get on the phone with the credit card company and ask for a credit limit increase, even temporarily. Real emergencies may merit the $39 fee. Regular shopping and purchases do not.
- Safety net: The best financial safety net you can have is not a credit/debit card that will charge you nearly $40 for going over your limit but an emergency savings fund. Even if you have to start small, at least start saving today.
If you have any questions, would like to discuss your financial challenges, or are just looking for advice, please call us at your convenience. As always, we are here to help and look forward to hearing from you.