Thursday, July 2, 2009

Credit Card Companies Spike Interest Rates Before New Law Goes Into Effect

The law of unintended consequences: the Credit Card Trifecta -- lower limits, higher rates, higher minimum payments."

Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability to do so, much to the irritation of Congress and consumer advocates.

Congress passed, and President Obama passed, a new law in May that would prevent credit card companies from raising interest rates on existing balances unless the borrower was 60 days or more past due. The new law also requires the original interest rate to be restored after a 6 month period of on-time payments.

While it's true that the credit card companies are engaged in practices that border on loan sharking, the facts are disclosed to the consumer ahead of time (though usually written in legalese and printed in 6pt type). However, there is ALWAYS the law of unintended consequences when Members of Congress (most of whom have never run a business or know very little about the economy) start meddling in private enterprise.

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