Are Fixed Rate Credit Cards a Thing of the Past?

As expected we are starting to see more moves by the credit card industry as they try to get in front of the Credit Card Accountability Responsibility and Disclosure Act. J.P. Morgan Chase and Bank of America recently announced that they will be changing their terms of service for many of their account holders that have fixed-rate credit cards.

The new law will, among other things, restrict interest rate increases on cardholders that carry a balance unless, and here’s the big caveat, the credit card has a variable interest rate. The new legislation will be phased in completely by February of 2010 so the banks and credit card companies are now scrambling to position themselves before that deadline.

One of the major points of the law was to end abuses and predatory practices by the credit card companies with regards to charging runaway interest rates and constantly changing terms and conditions. That of course, means that the bottom lines and profitability of the credit card issuers is going to be affected in a big way.

So in response to that we are seeing these changes from the banks and credit card companies and we are more than likely are going to see the others follow the lead of Chase and Bank of America. Plain and simple, credit card companies are already finding loopholes in the new laws and are beginning to exploit them.

Here is what the spokeswomen of Bank of America and Chase had to say:

Bank of America spokeswoman Betty Riese said in a statement, “The change from fixed to variable rates allows us to better manage our business as market conditions change”. Riese further added, “legislative and regulatory changes that limit our ability to reprice for risk were a factor in our decision”.

Riese’s counterpart at Chase, Stephanie Jacobson confirmed that some Chase credit card account holders were also recently notified about the change in policy. Jacobson said, “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.”

Related Information:

1. Annual Percentage Rate (APR) Explained An explanation of how your credit cards APR affects the cost of credit for you....
2. Card Rates Rise While the Prime Rate Falls This article discusses the strange phenomenon of the prime rate going lower as credit card interest rates go higher....
3. What You Can Do If Your Credit Card Company Raised Your Interest Rate We offer some solid advice on what you can do if your credit card issuer raised your interest rates....
4. Get the Facts on Low Interest Rate Credit Cards Learn about how low interest rate credit cards should be valued. Some are not the great deal that they appear to be....