Citizens have reasons to worry when using their credit cards. The Credit Card Accountability Responsibility and Disclosure Act, popularly known as the CARD Act which was brought out in 2009 is yet to bring some relief for customers. In an effort to prevent the credit card companies from misleading its customers, the Act brought in a few measures which the companies would have to comply with. This included notifying the customers when there is a change in the rate of interest. The act even curbed the credit card companies from levying certain overhead charges like inactivity charges and the like.
Owing to this, the credit card companies like Citigroup Inc and J.P.Morgan Chase & Co, Discover Financial Services and many others are working out other plans to recover the losses. The new strategy involves enforcing new set of fees which can be enforced without violating the CARD Act. Victor Stango, an associate economist with Federal Reserve Bank and a professor at University of California agrees that banks are working out plans to replace new fees with the old so that they can recover from their losses to some extent.
The CARD Act comes as a major blow to the banks which will put their losses to nearly $390 million a year in fee revenue as predicted by David Robertson, publisher of industry newsletter Nilson Report. According to reports from Pew Charitable Trusts, the annual fees have increased by 18% to $59 between July 2009 and March 2010. Even credit unions have increased their fees by 67% during the same period.
The banks are arguing that even high interest rate on customers does not ease their situation and they would find it difficult to extend credits to their customers if they completely comply with the new Act. Not much can be done about the new fees being worked out by the banks since they are cleverly framed keeping in mind the loopholes in the CARD Act.
One strategy that is being used by banks is that of issuing professional cards to their customers. These cards will not come under the CARD Act and hence works out to be advantageous to the credit card companies. Josh Frank, a senior researcher at Center for Responsible lending agrees that issuing professional cards is an easy way to work around the CARD Act.
It is up to the borrowers to stay vigilant and keep themselves from falling prey to additional charges when not necessary.