Various reforms are being introduced by the CARD Act for the credit card industry. For consumers there are many good news but there are many bad news as well. The most important change is that as banks would not be allowed very aggressive tactics anymore, there could be higher fees and charges now so that they can compensate for their losses.
There has already been a substantial increase in fees and charges as the new law has given financial companies more freedom in implementing many such changes. As a consumer, you will have to read all terms and conditions carefully so that you are not trapped in a deal, which has huge costs involved for the use of the credit card.
Another major change for the industry will be that after the act, the process for getting credit cards will become more stringent. Consumers will find it more difficult to get credit. The underwriters will follow stricter rules and you might now have to provide a lot of details of your income and savings. Those whose credit score is below average will find it very difficult to get a credit card. The main idea behind these changes is to minimize risky loans so that people can only get as much credit as they can manage to repay.
As the credit market becomes tougher, the total amount of credit car debt in the financial system is bound to go down. The lenders will have to be choosier about the people they give credit to and that would have a lot of impact on how the whole industry functions.
Another negative impact on the credit card market will be that earlier users who made a lot of purchases with their credit cards got various rewards for using the cards for their transactions. These rewards, such as free airline tickets and gift vouchers, are likely to be reduced because of the act. You should carefully check all communication from the credit card companies as they might give notice of changes in their reward plans.
The new law also has some positive aspects and the interest rates on credit cards will now be regulated. The issuers can increase the rate for missed payment only after giving advance notice and only in limited cases.
However, the law does not protect consumers who have delayed many payments and the credit card issuers are free to charge any interest rate from them. Therefore, you still have to ensure that you do not miss or delay payments.