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What Can and Can’t Your Credit Card (Company) Do?

A credit card company is not a public servant. Nor are they your employees, even in the traditional way that businesses are looked at as serving customers. Credit cards seem to fall into the category of business relationships, mutual beneficial in many cases, but also with great potential for either side to hurt the other.

Even in the best relationships, it’s important for both sides to know what the other can and cannot do. The credit card companies put people, money, and effort into knowing exactly what you can get away with and exactly what they can get away with. If you’re a credit card user, you should protect your own interests by educating yourself on what the credit card companies can and can’t do to you.

Earlier this week, a reader sent me a link to this slideshow on the Card Act and what companies can/can’t do. I’ll outline the main points below, but for details, check out the slideshow.

  1. Can they change a fixed interest rate to a variable interest rate? Yes. (though the CARD Act will require them to keep it fixed for the first year unless the customer makes an error.)
  2. Increase your monthly minimum payment? (e.g. from 2% to 5%) Yes.
  3. Reduce your credit limit? Yes.
  4. Raise fees on your card? Yes.
  5. Close your account without permission? Yes.
  6. Force a higher interest rate? Yes, but not immediately. 45 day warning and option to close account.
  7. Force you to accept a higher rate for an extended period? Until the CARD Act takes effect.
  8. Change the rewards program? Yes.
  9. Increase your interest rate after defaulting on another card? Until the CARD Act takes effect.

The CARD Act won’t fix everything, but it’ll do away with some practices that are sharply aimed at gouging the consumer (such as applying payments to lower-interest balances first).

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Miranda September 18, 2009 at 10:43 am

It really is true that when we use credit cards (especially if we carry balances) that we are handing over some serious control over our finances to someone else.
.-= Miranda´s last blog ..Household Wealth Increases =-.

Cheapskate Sandy September 18, 2009 at 2:18 pm

I never understand why people think the credit card companies owe them something. No one forced us to use the cards and even when they jack up the rates we agreed that it was okay for them to change those things when we wanted you to!

I hope everyone is now 10% wiser than before the recession.
.-= Cheapskate Sandy´s last blog ..Finance 101: Why Banks Want You to Open Accounts =-.

Mr. Not the Jet Set September 18, 2009 at 10:20 pm

The card holder contract pretty well give the CC company the right to do ….. whatever they want. Yes, the recent reforms have banned some particularly abusive practices. Amen to that. It’s only a matter of time before they cook up newer and crazier ways to mooch of off businesses and consumers.

I don’t care what the product or service, I won’t sign anything that one sided.
.-= Mr. Not the Jet Set´s last blog ..Microfinance or Microslavery? =-.

Matt Jabs September 19, 2009 at 1:49 am

Funny you wrote about this today…

I arrived home from work to find a letter from Capital One whom I just paid off a few months back. It was a bill for a $29 “membership fee.” I have had that card for years and NEVER had a mem fee. They must have instituted it in the fine print when they notified me of the increased rate about 4 months back.

I’m still not sure if I’m going to try & raise cain or just pay it & be done.

I’ll probably write about it on DFA & see if I can get any solid advice.
.-= Matt Jabs´s last blog ..Should I Invest While Still In Debt? =-.

Amanda Hallock September 22, 2009 at 11:19 am

Great post – everyone that signs up for a credit card should understand each of these main points before they begin to accumulate debt on their card. Might change some spending habits!
.-= Amanda Hallock´s last blog ..3 Online Sites to Combat The Tiny Death Called Debt =-.

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