Card Users Are Protected From U.S. Debt Downgrade Changes

by San Antonio Attorney

Consumers in the U.S. who hold about $4,950 on their credit cards as stated by TransUnion, are going to be pleased to know that whatever modifications resulting from the downgrade will not be remarkable. And within a certain degree, protections against the changes have been set in place.

The majority of the accounts with fixed rates were modified to adjustable rates in 2009 as a reaction to the downturn in the economy and latest policies.

Banking institutions do not advertise the rates being charged to their existing clients, but almost ninety six percent of the bank offers that have been delivered in the first half of this year for new credit cards have adjustable rates, according to market research firm Mintel Compermedia.

At the moment, banks provide an average of 14.4 percent in yearly interest rate, as reported by Bankrate.com.

Then again, nearly all credit card rates go up and down with the prime interest rate, and that is attached to the interest rate placed by the Fed. It will help to provide protection for credit card customers from the movements of the market temporarily.

The good thing is that even if banks start to send out higher credit card rates, existing account balances are going to be shielded from rate increases based on the credit card reforms in 2009. This implies that only new charges can be subjected to increase of rates. In the event that rates go up many times within a number of months, credit card customers may wind up with various rates on different account balances.

Consumer education for SmartCredit.com president John Ulzheimer said that the regulation currently mandates banks to apply any kind of payments beyond the minimum requirement to the maximum rate balance. The purpose of this is for the new balances to be paid off sooner.

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