Posted: June 4th, 2011 | Author: Joe | Filed under: Banking, Credit | Tags: Banking, Business Credit Cards, CARD Act, Credit Card Accountability Responsibility and Disclosure Act, Credit Cards | No Comments »
I’ve already chronicled the many “unintended” consequences of the CARD Act of 2009 that affect consumers, but it looks like there’s a new one that affects business owners.
Since the CARD Act eliminates many of the fees and interest payments banks traditionally use to offset other expenses and because the CARD Act only regulates consumer credit cards, banks are paying for other services like free checking and general business costs on the backs of business card holders.
That may not sound like a big deal to many, especially with the “business is the bad-guy” mentally that seems so prevalent over the past few years, but it’s not companies like GE we’re talking about – it’s largely small, independent businesses.
Many of these are people who have lost their full time jobs as employees and decided to make a go of it on their own.
The biggest concern for most business card holders is a hike in interest rates on existing balances. This could mean thousands in extra payments a year for anyone carrying a large balance. That’s significant for many home-based or startup businesses.
To make matters worse, some unscrupulous credit card issuers have begun marketing business cards to individual consumers:
“A study released Wednesday by the Pew Charitable Trust’s Safe Credit Card Project says that consumers are still vulnerable to these practices, because more than 10 million offers for business cards are sent to U.S. households each month.”
Consumers may not even be aware that the CARD Act doesn’t pertain to business cards. It looks like credit card rates and fees that were once difficult to maneuver have just become more so. Be careful out there people. 
Read more.
Related Posts:
Posted: March 21st, 2011 | Author: Joe | Filed under: Banking | Tags: Banking, CARD Act, Credit Card Accountability Responsibility and Disclosure Act, debit cards, Fees | 2 Comments »
It seems like only last year that the consumers were going to get some justice, and the banks would pay a price for all their sneaky tactics. Well, actually it was 2 years ago when the CARD act was passed into law and we are now seeing what only politicians who supported the bill could claim as “unintended” consequences.
Namely, Banks are looking at increased costs of doing business and a loss of revenue. Anytime ANY business see an increase in the cost of doing business – be it from increased taxes, or increased costs of raw materials – those costs get passed along to the consumer.
Here are 3 ways banks are passing along the costs of all that wonderful new regulation…
Higher ATM fees
JP Morgan Chase and HSBC are two of the mega-banks that have opted to charge non-customers who use their ATMs a fee. In the case of Chase, it’s only in Illinois and Texas and the fees are $5 and $4 respectively. It’s a trial to see if they can raise enough revenue to justify the new fee nationwide.
When you consider that most people use ATMs for quick cash, in $20 denominations you’re looking at what amounts to a 12.5-25% fee for a $20-40 withdrawal! And that’s on top of anything the non-customer’s own bank charges for out of network ATM use!!
Meanwhile, HSBC is imposing a $3 fee nationwide to non-customers who use their ATM network.
The end of free checking
Bank of America, Wells Fargo, Citi and Chase are all ending free checking as we know it. Some will continue to offer “free” checking, while others will simply discontinue the practice altogether.
BofA will be adding checking fees over a two year period, starting with new customers. Bank of America is going to start charging fees of $9 – $25 for customers who don’t maintain a certain minimum balance level. I’m not sure what that level is.
Wells Fargo is planning to start charging $5 a month for new checking, and its CEO has warned that more costs will be passed along to customers in the near future.
Citi bank is going to start charging customers who make less than 5 debit card purchases per month an $8 fee for checking.
And Chase has started charging customers who don’t maintain a minimum balance a $10 per month fee on the West cost, and $12 everywhere else. Again, no mention of what that minimum balance is.
Maximum limit on debit card purchases
Finally, due to a limitation on interchange fees (what banks charge stores for every swipe of your card) many banks are considering a limit on debit card purchases.
Since the government regulation seeks to cap the amount banks can charge stores for the transaction, and banks don’t want to lose revenue they are thinking of limiting the amount you can purchase on your debit card, thus minimizing their losses and maximizing the number of transactions.
This is a great case of where a regulation that seeks to limit excessive fees results in the exact opposite and adds further inefficiencies to boot!
JP Morgan Chase is considering a $50 -100 limit. If that becomes reality, a lot of people are going to have a hard time filing up at the pump soon!
Final thoughts
Anytime the government mandates or regulates, costs go up. Sometimes consumption goes down as a result, but usually consumers just end up poorer. This is an excellent case in point. The CARD Act of 2009 is going to cost consumers and set banking back a decade or more.
We already see this with the end of free checking. It was not long ago that banks charged for basic checking, but as revenues rose, banks could offset the cost of checking and offer that as a free service to consumers. Not anymore.
How many other services do consumers take for granted, only to see them eventually eliminated or become offered to a select few for an additional charge? Time will tell.
In the meantime, the best bet for consumer is to avoid the mega banks altogether and stick to local or regional banks and credit unions.
Sources:
New ATM fees
Era of free checking is over
Debit card limits
phot by islandgal
Related Posts:
Posted: January 28th, 2010 | Author: Joe | Filed under: Credit, Debt | Tags: CARD Act, Credit Card Accountability Responsibility and Disclosure Act, Credit Cards, Debt | 4 Comments »
The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 has received much favorable press since it was enacted, and rightfully so in many cases.
There have been cases where unethical credit card companies have attempted to skirt the new regulations, but here’s another why in which the new regulations may negatively impact credit card users.
Part of the CARD Act is meant to put an end to unfair rate hikes and interest billing cycles, but it also aims to end the age of giving a credit card to anyone with a pulse.
Don’t get me wrong, I think that’s a worthy and noble intent. But there are destined to be people who get caught in the middle – who need access to credit, but really shouldn’t have it. I say they’re in the middle because they are in between qualifying for a credit card and not having to depend on one.
Many of these people are those who have simple not put aside savings in an emergency savings account. The result is that they are caught without access to cash or credit when their income suddenly drops or ends completely.
As John Ulzheimer, president of consumer education for Credit.com, says:
“We’re headed down the road where if you can’t verify your income, you can’t get a credit card. It’s going to affect the unemployed and the ability of small businesses to hire people and fund capital purchases. That all has a trickle-down effect to the economy.”
Again, I think this is true but it’s also part of a necessary pain. If you can’t afford to pay off your credit card balance every month, then you can’t afford the credit card. It’s that simple. And shouldn’t we only be giving credit (or loans in general) to those who can afford to pay it back? Doing otherwise is what got the economy in the mess it’s in – the push for “affordable housing” led to sub-prime lending, which has brought us to trillions of dollars in loans that can’t be repaid.
The sad truth is that too many people have become accustomed to thinking that credit cards are their emergency savings plan.
Consider that, according to a Consumer Reports survey conducted in 2009, 30% of consumers had credit card debt of $10,000 or more, and that 44% of them responded that they would need their credit cards to meet monthly expenses over a six-month period if their income became disrupted.
So, when the new CARD Act goes into effect on February 22nd, there are going to be a lot of people caught in lower available credit limits, or no access to credit cards, all of which will probably lead to further hobbling the economy at least in the near term. But I think it’s a good thing in the long term if we can get people to create and fund their own emergency savings, say in a high yield savings account like ING (click here for a free $25 referral code), and stop relying solely on credit cards as a financial life line.
source
Related Posts:
What others are saying