How Do You Spell Credit Card Relief?

Filed Under Credit Cards

Well, it’s been just a few short months since the Credit CARD Act of 2009 went into effect and the results are promising. Just in case you weren’t paying attention, the CARD Act (AKA the Credit Card Accountability, Responsibility, and Disclosure Act) was designed to swing the credit card pendulum back in the direction of the consumers and away from the credit card companies. And it’s working; credit card debt relief is in sight.

The reason we needed the help is because over time (and especially in the last 10 years) the companies that provide us our credit cards have inched their way more and more toward the “dark side.” Take interest rate calculations for example. There are at least five or six different formulas used for calculating annual interest rates and they’ve evolved over time. Each one replaced the previous one in the marketplace and each one incrementally favored the banks and credit card companies a little bit more.

Then there’s the size of the interest rate caps. It used to be that credit card vendors could only charge as much interest as their home state would allow on our credit card purchases. That is, the state in which their business was based or incorporated. And most states had reasonable limits on the amount of interest that could be charged. But when banks were allowed to go nationwide they were allowed to move their credit businesses to states that allowed huge interest rates; states like Delaware or South Dakota. The 29% credit card interest rate soon followed.

It’s a little hard to believe, but banks are allowed to legally charge interest to their credit card customers that would be illegal for a private citizen to charge. If I tried to make private loans to my friends at the interest rates some of the larger banks charge, I’d be thrown in jail. I believe they call it Loan Sharking.

And how about the fees banks now charge? I shouldn’t get started on fees because I might not stop. Suffice it to say that there was a time when banks made most of their money from the interest they charged on loans but now they make nearly 50% of their income from the fees they charge against our credit card bills. Is it any wonder that they lobby Congress hard and fast to keep the status quo?

Now I’m all for free enterprise but when companies get too big, they begin to forget about the little guy. They have so many “little guys” in their consumer base and they have such a stranglehold on the marketplace that they end up just dictating to their customers. That’s when the services they offer stop being services and turn into necessary evils. I believe that’s what’s happened to the banks and to the credit card industry.

We have a little bit of credit card help now, but how do we keep this wave going? Well, I think we do it by making lots of personal finance decisions that benefit us and not the big companies. And what I’ve done is put together my own personal bank and credit card relief formula.

I don’t use my credit cards. I still have a couple but they are used once in a blue moon. I almost completely use a reloadable prepaid debit card because prepaid debit cards help me control my spending unlike their credit card cousins.

I’ve also adopted what I call the Two-Bank solution. I have accounts at one of the “Big Banks” but I also have accounts at a local credit union. I intend to split my finances that way from now on. I’ve severely limited my affiliation with the big bank and fully intend to eliminate all of the remaining accounts as soon as I can. Then I’ll start up with another, smaller, neighborhood bank (still keeping the credit union accounts).

For me it seems like a good idea to do business with two financial institutions. I think it helps competition which is the only leverage I have in this marketplace. Though, I’m under no illusion that my individual balances are going to tip the scales forever in the direction of the consumer. Of course if everybody would take this approach, now that would be some leverage. But I’m content with my little victory for democracy and fair play. Anything I can do to keep the little guys in business who treat me well over the big boys who don’t is a win in my book.

Over time, if enough people take tighter control of their credit card spending and rein it in, we will see a sort of organic credit card relief. The key to that I think is in realizing that the banks are more adversaries than partners and in treating our transactions with them accordingly. Our voices are small and their pockets are deep. But if enough of us vote with our wallets, we’ll win.

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credit card debt relief, credit card help, credit card relief, credit card relief act, credit card relief program, federal credit card relief

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