Is credit card reform good for consumers or not?
Posted
May 21 2009, 05:35 PM
by
Karen Datko
Rating:
Many bloggers have applauded the credit card reform legislation now on President Obama's desk. It would eliminate or restrict some of the card companies' most egregious practices.
But will it have unintended consequences? For instance, will people who don't carry a balance end up being charged an annual fee? Will higher interest rates and lower credit limits become the norm for those who do carry a balance? We'll see.
But the strangest observation we've seen is that the new law does next to nothing to benefit the cardholders called "deadbeats" -- the term of endearment credit card companies have for those customers who never carry a balance from month to month.
Hmm, maybe we don't need any help.
We're not going to use space here spelling out the provisions of the act. You can read about it here, here and here. Essentially, it would provide more transparency and restrain companies' most annoying tactics to increase interest rates and impose fees.
Patrick at Cash Money Life observes what it doesn't do. He writes:
- Interest rates will not be capped.
- This does not prevent credit card companies from inventing new ways to add charges or bill customers.
Some of the provisions that have attracted online comment:
You can't get a card under age 21 unless an adult co-signs or you have a job. Unfair, critics say, because if you're old enough to vote and fight wars your elders started, you should be able to easily access credit too. (We think credit should be extended to people who have a way to pay their debts. That's a provision of this bill. And we agree with those who think teens need better personal-finance education -- as do many adults.)
The government is messing with something it shouldn't. Critics say consumers could encourage the industry to better itself by no longer using cards issued by the worst offenders. (Really? We wouldn't have wanted to hold our breath waiting for that to happen. The manipulation of consumers by credit card companies has gotten steadily worse -- not better.)
Annual fees could become more routine. (If our card company decides to start charging us an annual fee, we'll switch to one that doesn't. We suspect some will still be around.)
In general, interest rates may go up and credit limits will be lowered. (So what? We use the card now only as a convenience, not as a way to spend money we don't have.)
People will still be able to get into debt trouble -- a comment more about people than the credit card reform act. Bloggers seem to agree that the new law will be no substitute for personal responsibility. (We think government regulation was needed to rein in bad corporate behavior, but it's not the government's job to save you from yourself. If you're really smart, you'll never carry a credit card balance again.)
Related reading:
What the new credit card law would mean for you
The credit card companies are not your friend
Another big credit card debt bites the dust
Why you should never co-sign a loan
