Being a Credit to Your Credit Card

The Credit Card Accountability Responsibility and Disclosure Act of 2009 went it to law last week and was sold to the public as a way for Democrats to protect Americans from those “greedy credit card companies.”  How dare credit card companies follow through on their terms of the card holder’s agreement and raise people’s rates when they miss a payment, for example!  Why, carrying out the terms of a contract is unAmerican under the Democrats!  Outrage!

As with so many laws written by Liberals, this one has more than a few unintended consequences:

To make up for lost revenue, some card issuers have already hiked interest rates, even for customers who are current on their payments. That’s had a significant impact on small-business owners who, if they can’t get a bank loan or a line of credit, have to rely on their cards when cash flow is slow.

To make up for lost revenue, and because they’re less able now to base rates on a borrower’s risk of default, card companies have “come back with a broad-based approach, which is to raise rates across the board,” said Robertson, who says card companies aren’t likely to lower rates any time soon.

So, people who are paying on time, who are fulfilling the conditions in their card holder’s agreement get penalized because the new law protects people who don’t fulfill their obligation and don’t pay on time.

Also, credit card companies are lowering the limits for many card holders which can adversely affect small business owners who sometimes rely upon short-term loans to keep the doors open:

That’s made it tough on small-business owners such as Tracie Spriggs, owner of Honey Biscuits, a catering company based in Woodlawn. The interest rates on both of Spriggs’ credit cards were increased recently, and the credit limit on one card was reduced twice, first from $10,000 to $8,000 and then to $6,500.

Even though Spriggs has been in business five years, she had to use her credit cards for the $15,000 cost of building and outfitting the two commercial kitchens she rents out to other caterers and food-service companies.

What I could never figure out is how consumer’s paying high interest on credit cards or having their rates raised would be the fault of the bank which issued the credit card to begin with.  Nobody is forced to get a credit card nor, once they have one, to run up huge debts they cannot repay.  Every fee, charge, and penalty is laid out in the card holder’s agreement.  If you don’t like the terms, don’t sign up for the card or simply cancel it or transfer your balance to another card.

What has happened as a consequence of this law is that people who follow the rules and do what they should are getting hurt and paying more in interest than they were before the law was passed.

That’s a Liberal law for you.

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