The Lenders Strikeback Pt. 2: More Credit CARD Act Loopholes

In July 2009, MYC covered some of the tricks that credit card issuers were using to tiptoe around the Credit CARD Act and still make big profits. What was supposed to be a devastating year for credit card companies has turned out to be not so bad, thanks to their creative efforts. In fact, Business Journal reported today that Wall Street analysts upgraded Capital One from “hold” to “buy” and MasterCard from “sell” to “hold.” The former’s stock has quadrupled since March and is now sitting pretty at $37.25. Meanwhile, we’ve seen our interest rates soar, our rewards get dinged and our credit limits limited. And now they’ve got even more tricks up their sleeve.

As Gary J. Truono of BDO Consulting said in BusinessWeek today: “Issuers always reinvent themselves.” Here’s a quick rundown of some of the new ways you can pay in the post-CARD Act era.

Tough Luck Variable Rates

The biggest loophole in the CARD caveat that says issuers can’t jack up your rates without a month and a half’s notice is in variable rates. When variable rates go up, you have no case. After all, you agreed to it when you signed up for the variable rate card. That is, unless you’re one of the many cardholders who suddenly had their cards switched from fixed rate to variable rate in the recent months. Sure, you can always find a better credit card when change hits – but is your score high enough? Can you afford to close your account? If you answered no, then you’re stuck wtih the new deal.

Penalty Box

While the CARD Act put a kibosh on fees for going over the credit limit, new fees have sprung up to replace them like so many garden weeds. For example, Fifth Third Bank is now charging a $19 tariff for – get this – not using your card for 12 months. How’s that for a reward for  exercising restraint? If you have cards that you’ve been keeping active to keep your credit to debt ratio high, you may want to dust them off and put a small purchase through just in case. (How about a Redbox? It’s only a buck.)

Beyond the Border

Another fee that wasn’t touched by the CARD Act was the international transaction fee. It’s always been common practice to charge a little extra for international credit card purchases in order to convert currency and such, but now, according to BusinessWeek, more issuers are charging for foreign transaction fees even if the company is based outside of the U.S. and accepts U.S. dollars. Not a world traveler? This still affects you if you make purchases from Internet businesses, where home base could be anywhere. Maybe it’s time to start using Paypal (which doesn’t come without its own bevy of fees).

“I’m not touching you, I’m not touching you!”

As part of the credit card law changes for February, the CARD Act is flunking the campus card peddlers and forcing them to drop out. No more free t-shirts, no more free pizzas, no more dangerous credit cards burning holes in the pockets of cash strapped co-eds. Lewis Mandell, a professor at University of Washington and advocate for financial literacy, conjectures that credit card companies will merely set up a few blocks away from campus, where students will likely walk past anyway on their way to class. Not only that, credit card companies are still free to target parents and alumni, who, according to most college affinity deals which sell contact information of students, parents and season ticket holders, are fair game.

Afflict the Comfortable

According to a press release from Mintel Comperemedia, credit card issuers are now targeting the affluent (i.e. those who weathered the recession with checking account balances and credit scores above 750)  with their recent marketing efforts. In the second quarter of 2009, issuers flooded the inboxes of wealthy Americans with 28% more direct marketing mail than they did in previous months. What’s for sale? “Premium” credit cards with fancier benefits, more rewards and, of course, higher fees. Newfangled cards include the Chase Sapphire, the Visa Black Card and the American Express Hilton Honors Surpass Card. Unlike Amex’s elusive, invite-only Centurion Card, this new breed of premium cards come with slightly more accessible annual fees (around $500, as opposed to $2,500) but the same amount of spendy starpower that can make a sales clerk at a snooty boutique jump to attention. Experts at Mintel Comperemedia expect the trend to catch on, stating “it won’t be long before this trickles down and we start seeing greater credit card marketing to all consumers.” So, if you’re ashamed of your “Baby’s First Credit Card” and want to wow retailers with your “Look at Me, I’m Stinkin’ Rich Card,” you may just have your chance soon – for a price.

That’s what’s new in the world of credit card company tactics for today. Stay tuned, though – this saga is likely to be a trilogy come February.

Notice any new credit card wiliness? Let us know in the comments section.

Photo by BobbyProm

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