By: Tony Francis
Submitted: 2009-12-31 13:09:18 | Word Count: 569
There is a new law created to protect future credit holders. Its creation was mainly based on the fact that many of today s teenagers already hold credit cards while still in college. The study conducted reveals that more and more of these cardholders are about to face debt problems.
The Credit Card Accountability Responsibility and Disclosure Act work to regulate the number of people who can apply for credit cards. For one, you must be twenty one years old with a written application. In it must contain proof that you have the financial capability to repay your credit. This means that you should have a job, if not a co signer who can handle both your finances in case you have trouble paying.
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This new law has many advantages for the credit card holder. Those who have created it have found what seems to be a fool proof way to indeed reduce the number of people going bankrupt. However, there are some things this law has failed to cover.
It takes effect on July 1, 2010
Credit card companies continue to increase interest rates at the moment. With this, those who have credit cards now are not directly affected by this law when it is implemented. Consumers will already be in a lot of debt by 2010.
Subprime credit card fees can still be a burden
The new law would require credit card companies to charge fees that are 50 or less of the credit limit of subprime credit cards. This rate seemingly decreases the burden of consumers. However, this rate could still be too high especially when charged at one time. Though credit card companies are restricted in a way, it does not say that they subprime fee should be spread out over the billing cycle which could mean a lot of help to the consumers.
Credit score matters most
Of course, the credit score matters with or without the new law. It mostly determines whether you would be granted with your loan and credit applications by lenders or not. However, reality is that most people will have to live with low credit scores one time or another. Those with low credit scores now and whose credit reports need fixing are doomed to have the least chances of applying for credit cards. This is mainly because credit card issuers have no other means of getting compensation for the risks from their inability to increase interest rates, but to be choosier. Those with low credit scores are bound to either get expensive subprime, or secure cards, or not get one at all.
Penalty rates can still be increased
One of the things that hurt most consumers most in their credit card accounts are penalty rates. The new law does not give credit card companies a universal limit when it comes to increasing penalty rates. Most of the states have laws against overly increases in interest rates. However, this does not seem to affect credit card issuers because they can always establish their business in states where the law is lax. The only thing that manages the reasonable interest rates for consumers is competition among banks.
Universal default is still actually on
True enough, the new law requires credit card companies to give their clients a 45 day advance notice when they impose increases on interest rates. However, they can still increase rates whenever they want to for whatever reason they come up with.
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