Will the New Credit Card Legislation Prompt Increases in Interest Rates and Charges?

Aug. 15, 2009 - PRLog -- The first wave of new laws that limit the powers that credit card companies can use in making decisions regarding their customers accounts will take effect on August 20, 2009,  but it seems that many credit card companies are reacting to these restrictions by taking action early.

Since the turn of the year the industry's larger players have been carrying out what can only be described as a type of 'cull', for want of a better description, weeding out those customers that pose the greater risk of loss; initially by reducing their lines of credit and then by cancelling their cards, whilst, at the same time, increasing rates and charges to those customers who possess excellent credit histories.

Credit card cancellation with no advance warning has been a recent trend that has caused many people to rummage through their pockets for alternative ways to make payment whilst impatient queues build up behind them at the check-out, embarrassing to say the least. But, after these new limitations come in credit card companies will no longer be able to cancel credit cards without first giving 45 days notice to the card holder, but it does't stop there as the same notice period must be given for any alterations made to a card's terms and conditions.

With regards to interest hikes and increases to fees and charges; there may well be some movement before the new legislation takes effect, but many of the major players have already been busy at work over the past few months increasing rates and charges, ever since the first muted words of new legislation were heard in congress, and many card holders have already been hit by rate increases.

Those customers who have accounts with Capital One, Citibank, Discover and U.S. Bank have had most to complain about. Capital One customers, for example, have experienced an average 50% increase on purchases and balance transfer rates since the start of the year.

The percentage of revenue that card issuers earn from fees and charges has increased by 3% since 2004 which doesn't seem an overly massive increase over 5 years, but when you consider that the credit card companies make 40% of their revenue from charges alone it does make you think again. Fees and charges have always been a nice little money spinner for the industry and this is one area where issuers will be expected  to cash in further.

The prognosis for credit card users isn't too good as the expectations are that lines of credit will continue to decrease and further increases in both charges and rates of interest can be expected. The advice of some experts is to look at smaller credit card companies rather than the well known larger companies as the monetary impact to the consumer of any changes may not be as great.  

For more information on credit cards, credit card consolidation and dealing with debt, as well as inforrmation about little known methods of debt elimination that the financial institutions would rather you nothing about, visit http://www.creditcardconsolidationloanssite.com