Credit card issuers still changing terms before new law takes effect

If you've discussed your woes recently when it comes to credit card charges, you may have more to talk about. Many credit card companies and banks have been making pre-emptive moves, increasing fees and changing interest rate structures before the deadline of next February when a new and more restrictive credit card act goes into affect.

According to Bill Hardekopf from www.LowCards.com "Discover recently announced that it will increase its balance transfer fees from 3% to 5%. This is another example of credit card issuers raising rates and fees before the CARD Act takes full effect."

Hardekopf says "even after the bill goes into effect in five months, the benefits for cardholders may be outweighed by an acceleration of interest rate hikes and increases in fees that have already taken place. Despite complaints from consumers, these rate and fee increases are helping issuers get financially healthy once again."

"This acceleration is made possible through loopholes that still allow areas of unhampered rate and fee increases. Right now, it seems that some cardholders may have been better off without the bill," says Hardekopf. "Since January, LowCards.com has tracked the changes made by eight credit card issuers and has recorded over 50 changes in interest rates, fees, rewards or terms."

According to Hardekopf and other analysts, raising balance transfer fees is a current trend among credit card issuers. Hardekopf says for several years, a 3% balance transfer fee was the industry standard. In June, Bank of America raised the fee to 4%. Chase then raised its balance transfer fee to 5% in August and Discover announced this week that it will follow with a 5% fee.

Card companies are also raising minimum payments, at a time when many consumers are out of work and using their credit cards more than ever. Many customers are now finding that negotiating a lower rate often isn't possible so some have been transferring the balance to a card with a lower rate. In some cases that might still be a better deal ultimately than what you have, but be aware that a 5% balance transfer fee for example will really add up. "To make matters worse, interest is charged on the balance transfer fee because it is rolled into the amount transferred," says Hardekopf. "If you transfer $5,000, your fee will be
$250 plus interest."

According to Hardekopf, Discover's net income rose to $577.5 million in the third quarter, up from $180.1million in the same period last year. He says Discover has tripled its net income by, among other things, increasing interest rates on some cards, adding a 2% foreign transaction fee (May 2009), shifting some fixed rate cards to variable rate cards and upping the transfer fee.

Hardekopf says other companies are also making these changes:

** APR changes. In October, Bank of America offers the BankAmericard Basic Visa Card. It is advertised as a simpler card with one-page of terms and conditions. The APR will be 14% plus prime which would currently make the APR 17.25%. In May, Capital One increased the cash advance APR from 22.9% to 24.9%.

** Reward changes. American Express for example has reduced the amount of cash you can earn on some of its cards to 1.25% on most purchases, down from 1.5%.

** Minimum payment changes. For example, in January, Chase increased the minimum payment from 2% of your balance to 5% on a number of their accounts.

** New fees. For example, Citi began charging a 3% fee for all transactions made outside the United States in US dollars. Previously, the fee was not added when foreign transactions were made in US dollars. (Feb. 2009)

** Annual fees. For example, in August notifications, Citi began informing some of its cardholders that they will be charged an annual fee of $30 to $90 unless they spend at least $2,400 per year.