Fed's new credit rules make sense

06/13/2008

Fed's new credit rules make sense

CREDIT cards may be the most competitive business in America. Anyone with decent credit - and a lot of people without it - finds his mailbox stuffed with come-ons touting "low introductory rates!" and "big rewards!"

That mailbox battle keeps prices down on the front end. But once you've signed up, many credit card banks find lots of ways to ding you with higher interest charges.

Federal bank regulators may put limits on those practices this summer, and it's about time.

Among the tricks of the card trade is "double-cycle" billing, in which banks charge interest on debt you paid off a couple of weeks ago.

They also can apply your payments to low-interest portions of your balance (such as money transferred from another credit card) while letting interest pile up on your high-interest debt.

Then there's the old-standby of the credit card game: hiking the interest rate.

Take a hit on your credit score or make a late payment, and up go your interest charges. The average "penalty" interest rate last year was 25 percent.

Not all banks practice such strategies, but enough do to prompt a low rumbling in Congress about the need for reform...

Source

http://www.sgvtribune.com/opinions/ci_9574994