Are the Days of Fixed Rate Credit Cards Numbered?

The credit card companies, two of them at least anyway, are quickly and quietly changing their terms of service for millions of credit card account holders in an attempt to get ahead of the newly passed legislation known as the Credit Card Accountability Responsibility and Disclosure Act.

While there are many components to the new law, which will not take effect until February of 2010, and chief among them is prohibiting credit card issuers from increasing interest rates on cardholders that carry balances unless, and here is the sticky part, they have a variable rate credit card.

Note the difference there. If it is a fixed-rate card the banks will not be able to raise interest rates whenever they like but if it is a variable rate credit card they can raise interest rates virtually at will. Kind of like what they do already. No, not kind of, that’s exactly what they do now.

So basically the banks and credit card companies are scrambling to find loopholes in any way they possibly can to skirt the new laws which are of course, a huge detriment to their profit margins. J.P. Morgan Chase for instance is now increasing its monthly minimum payment amount for about 1 million of their customers that carry balances to 5%. They used to charge 2%.

Both Chase and Bank of America reluctantly made public statements recently admitting that they were changing the terms of service for millions of their account holders by converting fixed rate credit cards into variable rate credit cards.

Bank of America spokeswoman Betty Reiss stated, “the change from fixed to variable rates allows us to better manage our business as market conditions change”. As to how this relates to the new federal rules that will go into effect Reise said, “Legislative and regulatory changes that limit our ability to reprice for risk were a factor in our decision”.

Reise’s counterpart at Chase credit cards Stephanie Jacobson had this to say – “Changing costs are requiring Chase to more closely examine the rates and terms we offer our customers. Variable rates reflect Chase’s changing costs for funding credit card loans “.

Now honestly, is anyone at all surprised that the credit card companies are finding ways to slice and dice the new credit card reform legislation before it even goes into effect? No, we didn’t think so.

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