No longer can credit card companies change due dates or hike interest rates without ample notice. Still, they’ll find ways to be profitable after the Credit Card Accountability and Disclosure Act — also known as the CARD Act — goes into effect Monday, experts say.
Wholesale changes meant to protect consumers from burdensome penalties levied by card companies will likely trigger results ranging from tougher access to credit to the rebirth of annual fees, said Ben Woolsey, director of consumer research for CreditCards.com.
“They’ll try to offset lost income,” Woolsey said. “It’s unprecedented that the government will come in and restrict the ability of [a company] to price the product the way they want to, but the fact that credit cards touch so many American households, the political pressure was so great that something had to be done.”
According to a survey conducted in late January on Credit.com, 27 percent of cardholders say their card companies have increased their interest rate — up from 19 percent in June 2009. Thirteen percent have had their credit limits lowered and another 15 percent say their minimum payments have increased.
Card companies may not stop there. Consumers might more frequently see fees for inactivity, balance transfers and cash advances and additional fees linked to card reward programs for travel and entertainment, for example.
For now, consumers have greater protections through the Cardholders Bill of Rights.
“This is a good first step,” said Credit.com expert Adam Levin. “It brings greater transparency, more fairness and creates a bit more structure. It tones down the Wild West atmosphere in the credit card world.”
Here are some of the most significant changes that go into effect on Monday:
By The Numbers:
Source: CreditCards.com, Nilson Report, Demos.org and Experian
Ask the White House: Austan Goolsbee, an economist who serves on President Barack Obama’s Council of Economic Advisors, will answer questions in a live online video broadcast town hall meeting beginning at 2 p.m. today, Feb. 22.
For the full list of CARD Act changes, visit CreditCards.com.