Today’s credit – a whole new ball game

The CARD Act signed by President Obama in 2009, was designed to protect consumers from unexpected increases in interest rates, decreases in credit lines, and other changes in the services offered by credit card issuers.

Though our economy continues to show signs of improvement, the bottom line is that, because of the recent recession, slower than expected recovery and the resulting changes in bank policies and government legislation, the credit landscape has changed forever. Gone are the days of “easy credit” where almost anyone could qualify for a credit line for almost anything. Credit issuers now operate by an entirely new set of rules.

Banks, lenders and card issuers continue to protect their bottom line by assessing credit applicants at a much greater level of detail. The minimum requirements that need to be met remain stringent, though some issuers have relaxed those requirements a bit. Likewise, consumers are best served by taking a much closer look at their credit agreements – reading all the fine print and asking the right questions.

Remember to look for the following pieces of information in your credit card’s terms and conditions:

  • APR  (annual percentage rate): This is the primary interest rate associated with the card. Is it a promotional rate that expires? Are there actions you might take that would invalidate the promotional rate or raise your rate? Understanding the interest rate on your card and how that applies to your balance will help you better plan for your payments and stay on track.
  • Default rate: What are the consequences of defaulting on your account? The CARD Act requires that credit issuers spell out the possible penalties that usually include dramatic increases in your APR. It’s important to know everything you can about your credit card and the consequences of late or missed payments to ensure that you don’t end up paying more on your account or losing your credit line.
  • Fees: Credit issuers charge fees for a number of transaction-based items, such as over limit fees. Read up on your bank’s fee policy to fully understand all the charges associated with your card and plan for the costs of your credit.

Overall, fully understanding your credit account terms helps you to better manage and improve your credit over time.

Look for future posts on emerging credit and lending legislation and regulation. 

 

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