http://www.defendyourdollars.org/2009/11/creative_credit_cards_are_a_bu.html
As we wait until February 2010 for credit card protections to kick in, issuers are finding lots of fun and interesting ways to make things difficult for their customers. Consumers have been sending us their terms and conditions, and some of the most creative are described below.
1. Monthly interest rate refund
The new law will prohibit issuers from raising interest rates on existing balances unless you seriously default by making a payment 60 days late. But there is a sneaky way around this new rule. Many credit card customers have found their APR increased to a whopping 29.99%, but the card company will credit back 10% of the total interest charges if it receives on time payments each month. The catch is that if you make a payment even one day late, you loose the benefit of the “program.” And naturally the bank reserves the right to end this “program” at any time.
The CARD Act was meant to prevent hair trigger defaults, for which a minor infraction leads to a disproportionate expense for the consumer. By developing this creative refund scenario, issuers can apply an increased rate to an existing balance for a slight mistake.
2. Partially variable rates
Variable rates fluctuate according to an index, like the Wall Street Prime Rate Index. Though variable rates make it harder for consumers to know how much their debt will cost in the long run, there is an occasional benefit for the consumer when the index drops. According to a recent study by Pew, issuers have almost all transitioned from fixed rate to variable rate credit cards. The study found that in July 2009 less than 1 percent of bank cards included fixed rates, down from 31 percent in December 2008.
A number of banks have adopted a system that deprives consumers of the benefit of a low rate when the index falls. These cards have a minimum rate that will be charged regardless of how low the index goes. So when the index goes up, a higher variable rate applies and when it goes down, it stops when it hits up against the minimum rate.
3. Grace period interest refund
Grace periods are not required by law, but if you pay off your balance each month, most issuers give you one billing cycle before they begin charging you interest on a new purchase. The new law does prohibit a widespread practice called double-cycle billing, which prohibits a creditor from imposing finance charges on the portion of the balance that has been repaid, when a consumer pays some but not all of a balance prior to expiration of a grace period.
If you thought that made your head spin, try to make sense of this change-in-terms which attempts to get around the new law. This card company now charges interest from the date of a transaction, meaning no grace period. But, if the consumer pays off the last month’s balance in full AND pays off the current month’s balance in full s/he will get a refund on the following month’s billing statement. AND if s/he pays off her balance at least four times in twelve months, the company will stop charging interest altogether.
If your card company has sent you a notice about changes to your account, we’d love to look them over. Black out the personal information and email it to marvti@consumer.org or fax to 415-491-0906.
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