Here's How The CARD Act Will Actually Change Credit Cards

Bob Sullivan at MSNBC—who coincidentally was one of the speakers at our event last night—has published a list of myths and facts about the new credit card bill. His article dispels some of the misinformation that’s out there right now about just what the act does, and what card companies are going to do in retaliation.

The point below is one I particularly like, because I disagree with the idea that “good” consumers will be “punished” due to the bad consumers out there. If anything, the perks good customers have had over the past 15-20 years have been financed on the backs of all those bad customers—as Sullivan points out, it was never a viable system to begin with.

It will make ‘good’ users pay for bad users. FALSE.

Yesterday, the credit card industry persuaded many journalists to suggest the law dooms perks like frequent-flier miles. Miles are progressively devalued anyway, so that’s no great loss. These perks also often seduced consumers into cards with bad terms (miles cards almost always have higher interest rates, for example). Annual fees may reappear, but for many consumers, “free” cards with sneaky fees are more expensive than cards with a predictable annual fee. And in the past six months, “good” credit cardholders have been treated to huge rate increases and credit limit restrictions anyway – not because of federal law, but because of the banks’ bad business practices. In general, the credit card industry has made its living through ill-gotten gains earned mainly through deception and confusion. Any business built that way is doomed to fail. Purging the industry of treachery is good in the long run.

He also points out that in the coming months, banks “will likely sneak in as many rate increases as they can before the bill takes effect.” Yep. Look at this email we got from a frustrated reader today:

I just received a notice from CapitalOne. Basically they are increasing our APR from 8% to 18%!! We can decline to accept these terms however the penalty is basically death and a giant F You.

If I decline, my account will be closed as of August 2nd. After that date, I cant use the card, and I forfeit any awards/rewards. If I decline, I can pay down my balance at the existing terms. (gee thanks, I think)

As a thank you for being such a good customer, once I decline, I will not be able to reopen the account. It will be permanently closed (their formatting). If I decide I want a new card, I have to complete a new application. Like I would ever want them again anyway!!

WOW…didn’t open the other envelope. CitiBank is doing the same thing….Prime +13.99 with a minimum of 19.99%

Got any K-Y?

“Dispelling myths on credit card legislation” [Red Tape Chronicles] (Thanks to .Xenn.!)
(Photo: TheTruthAbout…)