Customers won a strong arranged of safeguards with the passing of the Credit card Accountability and Responsibility and Disclosure Act of 2009. But financial institutions managed to arrange for a loophole within the form of “professional cards”. Professional card holders are operating without a net. Consumer protections within the form of limited late fees and transparent interest rate policies are non-existent with these cards. With billions of dollars in late fees and interest payments at stake, credit card companies try to convince ordinary customers that they need a professional charge card, small company credit card, or business charge card.
Consumer protections not extended to professional cards
Professional credit cards used to be reserved for small business owners or business executives. However charge card businesses broadened their efforts to include virtually everyone, the Wall Street Journal reports, following the March 2009 passage of the Card Act. In an effort to dodge the consumer protections provided by new credit card rules, charge card companies are swamping ordinary consumers with charge card applications. Synovate, a market research firm, reports that in the first quarter this year, 47 million applications for professional cards-a 256 percent increase from 2009-arrived within the mailboxes of unsuspecting customers.
The professional credit card swindle
Many people will nevertheless opt to hold a professional card. Becoming aware of the risks involved can be their only protection. To take as much of the customer’s cash as possible, Credit Loan reports that card companies will apply payments over the minimum to the balance with the lowest APR. This means the higher interest balance is compounding interest until the lower interest balance is paid off. Allowing 21 days from when a statement is postmarked and also the payment is due isn’t required, which allows banks to shorten the window for making it harder for cardholders to pay on time. Payments one day late can trigger huge arbitrary rate of interest increases. Finally, professional charge cards can change interest rates, transaction fees, annual fees and penalty fees terms without any advance notice.
Small company safeguards could foil credit card corporations
New credit card guidelines do not apply to professional cards because smaller businesses get shafted by Congress when it passes laws to protect consumers, according to Bob Sullivan at MSNBC. Sullivan offers the example of charge card fraud, and just how small businesses are stuck with the consequences . Most cardholders do not realize that their liability protection from credit card fraud comes at the expense of the business that makes the transaction with the lost or stolen card. Now that a different set of rules for professional cards is being exploited by credit card businesses to bait consumers, Sullivan suggests that increasing the exact same protections within the Card Art to businesses would benefit everybody.
Additional reading
Wall Street Journal
wsj.com
Credit Loan
creditloan.com
MSNBC
redtape.msnbc.com
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