How Much the Effect of Capping Credit Card Interest Rates?

A new law favored by two Democratic lawmakers yesterday. The law would set a new national cap on the interest rates for forbidding credit card companies from charging interest rates more than 16% , and to the cardholders who exceed a credit limit or make a late payment would be charged fees no more than $15.


College students who want to open credit card accounts also become much harder with the bill passed in May which banned certain fees. And, ahead of the implementation of the federal CARD Act, nearly all the major banks have concurred increased interest rates. It go against the consumer's interest with the increased interest rates by credit issuers. With this legislation, credit agencies have been restricted their greed for profits on all the American people, who paid for the mission.

It is no surprise that the bill met with vehement opposition from the financial services industry. Especially the representatives of South Dakota and Delaware, South Dakota is home to Citigroup’s credit-card division, while Delaware is home to the credit-card arms of Bank of America, HSBC, and JP Morgan Chase. Under the new bill, it become harder to get consumer credit, the economy of Delaware has taken a hit, employment rate of financial fell by 10 percentage points since 2007,while overall salary declined 25% accordingly. So, in order to attract credit card issuers to set up operations in the state, these two states repealed the terms of interest rates cap of the new law.

However, the effect is quite uncertain for the law to positive high or low credit card interest rates by capping credit card interest rates.

The Main Effects of the New Law to Credit Card Companies

Under the new law, the credit card company is required to give you 45 days written notice before raising the interest rate on exist card and list out the amount of time it would take a customer to pay off his balance for every bill. The statement will show you the ugly truth of the gimmicks that card companies have used to drive up profits.


The credit Card Act of Accountability, Responsibility and Disclosure of 2009 aimed at protecting consumers from sudden interest rate hikes, excessive fees and other moneymaking gimmicks may be only favor the wealthy. These regulations are leading all issuers like American Express Co. to the top of the credit food chain. The will race to use reward points to keep customers with top credit scores, while the excessive competition is never a good thing in any industry.


The average credit score of cardholders for American Express is 754, which is 32 points above the other counterparts. The borrowers with top credit scores, for example, Walt Serafin, who is the Biotechnology company manager and a cardholder of AmEx, used reward points from his top scores credit card paired with a holiday discount and purchase an Apple iPhone. While the borrowers with low credit scores were aimed at making up for lost revenue because of the new law. They may encounter new membership fees, difficulties applying for credit.


The Credit CARD Act also caused the issuers tight their lending standards, while a large numbers of card companies have already relaxed lending restrictions and a lot of customers get high consumer loans in the fourth quarter. While in the same period, many cardholders focus on trying to pay off their debt and the revolving consumer credit has been falling every month, it reached a low point and fall by 9.6%, 2009,showed by the Fed report.