Fed Proposes Rules Limiting Credit Card Fees

http://www.forbes.com/2010/03/04/credit-card-rules-fed-personal-finance-fed-rule-changes.html

Terms

1. CARD Act- Credit Card Accountability Responsibility and Disclosure Act
2. revenue- the total income produced by a given source
3. Inactivity fees- A fee charged to investors whose trading activity meets their brokerages' criteria for an inactive account


Explanation

The Federal Reserve thought of a new plan to prevent the credit card industry's ability to "charge certain fees and levy high interest rates." New rules would be added to the CARD Act and could take effect by August 2010. Federal Reserve Governor Elizabeth A. Duke said that the CARD Act would credit card companies from charging large penalty fees and "require issuers to re-evaluate rate increases imposed since the beginning of last year." The CARD Act was passed in May 2009 with bipartisan support. Bank of America and American Express have charged customers inactivity fees for not using their cards often enough. The new rules added to the CARD Act would forbid credit card companies from charging a customer a penalty fee that is much more than the dollar amount involved in the customer's violation. Credit card companies will not be able to charge a customer many times for a single late payment or if the customer goes over his or her credit card limit. Credit card companies will also be required to explain to customers why their interest rates were raised.


Prediction

I think that one of the main reasons credit card companies charge so many fees is so that they can make alot of profit and it's a smart way to make profit. Even though these companies charge alot of fees, people should know that they need to pay their credit card bills on time. It's not like they can decide when their bills will be due, but when they do, they complain that the fees are too high. I do think that these new rules added to the CARD Act will assist people with low incomes who cannot afford to always pay their bills on time. The new rules could possibly prevent some people from going bankrupt. However, the banks will lose alot of profit from the CARD Act and they will have to think of a new way to make profits.