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What to Expect from New Credit Card Law

Give a bank an inch, and it takes a mile. Legislation is making its way through Congress calling for an overhaul of credit card policies. It aims to force banks to stop universal defaults. That’s because a missed payment at one bank currently causes all banks to raise their interest rate.

The legislation will also require banks to delay punitive interest rate hikes until bills are 60 days late, provide more disclosure on how rates are raised and issue a 60-day notice alerting credit card holders that rates are about to move higher.

How have the banks responded? According to the New York Times, “Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks…”

What did you expect? Gratitude for the multi-billion-dollar bailouts funded by the taxpayers?

We wonder why long-term mortgages and car loans are treated so differently from credit card debt.

When a person misses their car loan payment, a small late charge is usually tacked on (about $5 to $10). But if someone misses a credit card payment, they have to pay out a $30 fee and then pay another 20% in interest. We’re not sure how someone who just missed a payment is more likely to make a more expensive payment on time.

Banks could avoid many of these punitive fees if they just did one thing well: loaned money to the people most likely to pay it back.