Credit Cards - Making Loan Sharks Look Good

It looks like Congress is going to pass a bill that is going to change some of the laws regarding credit card companies and what they can do. A bill is badly needed, because right now the companies can pretty much do whatever they want.

Unfortunately, it looks like only minor changes will be made by the bill. A few things will be accomplished, such as:

* Giving card holders a grace period before a payment is considered late. A payment won't be marked as late (triggering fees and penalties) unless it is at least 30 days past the due date.

* Scrapping universal default. This was what allowed all credit card companies to raise your rates because you made a late payment to only one of them.

* Credit card companies will have to give you 45 days notice of a rate increase, and let you pay off items already purchased at the lower rate.

* If your rate is raised as a penalty for missing a payment, that penalty period would be capped at six months. If you were on time with payments during that six months, the rate would go back down to the pre-penalty rate.

* People under 21 will have to show proof of income or have a co-signer. The account would be capped at $500 and could not be raised without approval of the co-signer.

* If you pay more than the minimum payment, the payment overage must be applied to the part of the account being charged the highest interest rate.

These changes are needed, and I certainly don't mean to imply they're not. But the Congress has elected to ignore the biggest change that is needed -- to rein in the exorbitant and usurious interest rates being charged on some accounts.

There was a time in this country when it was both unethical and illegal to charge an interest rate of more than 20%. It was referred to as "loan sharking" and was considered to be criminal behavior. But the credit card companies make the old-fashioned loan sharks look good by comparison. Some of them are charging rates up to as much as 41%, and they're doing it legally.

Credit card companies are the new legal loan sharks.