As you might have heard, in May 2009 the president signed into law legislation on new credit card laws. This legislation directly affects the way credit card companies penalize those whose history of debt control has been less than stellar. If you’re one of those, well, congratulations, because you’re about to see some of the weight of your no-doubt crushing debt go sailing off into the sunset. Great, right?
But, you may be asking, what if I don’t have the uncontrollable behemoth of credit card debt rampaging through my life? What if I pay my balance off regularly and control my debt through the use of a sensible budget and payment scheme? How does this new legislation affect me?
Long story short: badly. At least comparatively. See, the new legislation has figuratively cut the card companies off from the tap of late fees, credit card penalties and ambush interest spikes. Oh, they’ll still see some profit from this, but not as much as they did a year, or even a month, ago. Thus, they’ll be looking for some way to replace all of that lost profit. And that, unfortunately, means they’ll be looking square at those of us with good credit.
Credit card companies, and by extension, banks, will most likely start looking into reviving the old specters of annual fees, immediate interest charges and the curtailing of cash-back and other reward programs. Basically all of the benefits you get for keeping your debt under control are out the window, if the banks get their way. Essentially, as a responsible credit card user, you will, in some small fashion, be subsidizing those who are not so responsible. Doesn’t seem fair does it?
To the credit card companies’ ways of thinking, if you’ve been keeping your balance paid down or off, you’ve been getting a free ride. You’ve been collecting perks like air miles and bonus points without having to pay an annual fee for the privilege of owning your card. Well, most likely that’s all about to change. Many other credit lenders have already begun raising interest rates and eliminating incentive programs in light of the recent legislation. Annual fees won’t be far behind.
Now, you might be wondering how you can cope with this. Simple. Most credit card annual fees aren’t large, as they are normally calculated as a percentage of your balance. Hence, the bigger your balance, the bigger your fee. So, keep your balance small, or paid off entirely, and you’ll see only a small fee every year. Now, if that’s more of a burden than you’re willing to take on for the privilege of going into debt, you can just as easily pay off your card and discard it. Take the recent events as an opportunity to find a credit card with a better interest rate and a lower annual fee than the one you’re currently using and go with it.
Regardless of what you choose to do however, bear in mind that when it comes to credit cards, there’s no such thing as free money. Even if it’s seemed like it the past few years.
