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As most of you know, in 2009 the government created the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act to help consumers with high rates and those that couldn’t understand and pay their bill. Turns out that the CARD Act may have a multi-billion dollar hit to the very consumers Washington was trying to help.
Since the anniversary of the CARD Act is today, I wanted to talk about a study that was done by CardRatings.com. They compared approximately 500 credit card offers in 2008 and in late 2011. Here is what they found.
1. Crazy Interest Rates – Over the past two years we have seen mortgage rates in the US reach an all-time low, but credit card rates have risen as a result of the CARD Act. In fact, the annual percentage rate rose by an average of 2.1% over the two year period. Based on roughly $800 billion in outstanding U.S. credit card debt over much of the past two years, this 2.1-percent increase in credit card rates would translate to an annual additional consumer cost of $16.8 billion.
2. Beat down consumers with poor credit – The CARD Act was implemented to help protect the consumers with credit troubles. However, the credit cards for poor credit are the ones that received the highest spike in interest rates.
3. Compounding balance transfer fees – Along with the standard interest rates, balance transfer fees have also risen over the past two years. Where once we saw most cards have a maximum fee, we don’t anymore. Balance transfer credit cards are some of the most popular credit cards and this would increase the cost of switching cards dramatically.
The CARD Act has definitely done some good things for the US, but I think that we put too much blame on companies for the ignorance or laziness of consumers.