6 Drawbacks Of The New Credit Card Rules

The Federal Reserve recently came out with new rules to protect credit card consumers. But as many of you may know from first-hand experience, there are still a good number of drawbacks in the new rules. Some of these drawbacks are listed below:

1. The rules don't take effect until July 1, 2010.

Creditors have been hiking interest rates lately and consumers are seeking relief immediately. Because the rules don’t go into effect until 2010, there is the fear that credit card companies will have even more time to squeeze consumers.

2. The rules don’t mention surprise credit limit cuts.

The new rules require credit card companies to provide 45 days notice when they want to raise interest rates, but the rules don’t make any mention of cutting consumers’ credit limits. When credit limits are cut, consumers are hurt because their credit utilization increases, affecting their entire credit.

3. Subprime credit card fees are still high.

The new rules put a limit on the fees that can be charged by subprime credit cards. But the fee is set at a maximum of 50% of the credit limit, which is still an exorbitant amount.

4. People with low credit scores are squeezed out.

Creditors are becoming more and more strict with their lending requirements, and consumers with poor credit are being squeezed out. They are moving towards subprime or secured credit cards with extremely high interest rates, or are not eligible for credit at all.

5. The new rules still allow for universal default clauses.

The Fed’s new rules still allow credit card companies to hike up your interest rates at any time and for any reason.

6. There are no limits on increasing penalty rates.

The rules did not put a limit on how high credit card companies can raise their penalty interest rates. Although some states have their own laws that set limits on this, credit companies outsmart them by setting up their headquarters where interest rate laws are more forgiving (such as in Delaware).

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