After watching the stories about the new credit card rules this week, I decided to do some digging and see exactly what options are available for those wanting to open new credit accounts. One story I heard was from a man with a long-time Macy's credit account. He said his account is now charged interest from the day of purchase. Once he pays the balance, and if he pays on time, the interest charges are credited back to the account. That means, he will never have a zero balance. Upon visiting the Macy's online credit application, I found another disturbing number, 24.5% interest! I think we should all pass on that one.
Next, I visited Bank of America curious about their Major League Baseball cards. Since I am a baseball fan, it would be fun to open a card showing my fan spirit. An interesting item here is that the fee for balance transfers is now 4% of the amount transferred. The interest rate is variable and goes from 12.99 to 20.99%! Apparently, the days of the old fixed rate cards are over. New card holders get anywhere from 7 to 10 months to pay off balance transfers interest free upon opening the card. After the initial opening period, further balance transfers begin accruing interest from the day they are transferred. Definitely don't transfer unless the new percentage is less than the old card.
Many financial experts recommend that people simply quit the big banks and switch to a regional banking institution or a credit union. For an example, I went to the Desert Schools Federal Credit Union website and looked at their credit card terms. When you click around the site, it is apparent that they do not underwrite their own cards. This is important because the fees schedule and onerous terms found with Bank of America look nearly identical to the ones found with this credit union card. The big difference is the rate range. It goes from 9.99 to 17.99% which is significantly lower if you plan to carry a balance.
The next stop was to find a regional bank that offered a card. But...I could not find one. Many seem to contract with an other third-party issuer to underwrite credit card for their members if they offered them at all. The new rules issued by the government attempted to reduce some of the most egregious acts committed by credit card issuers. Unfortunately, we all know that the vast majority of the members of Congress are not financially trained. That means that any rules they produce will stop the practices they intended to stop. However, the minds within the big banks are financially trained and very creative. The new terms received in the mail from anyone who has open credit accounts show just how little the Congressional action did to stop high fees as new ones were created. The best advice is always to pay them off as quickly as possible. There is always some way to get ahead. When you are trying to reduce debt, simply work account by account to pay off the balances. Any sacrifices that you can make to pay off your debt faster will be well worth it in the end when you can be debt free.