The CARD Act One Year Later: Is It Any Better for Consumers?

credit card - CARD actToday (Feb. 22) marks the first anniversary of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. Passed in 2009 to protect American consumers from predatory credit card practices and enacted last year, this piece of federal legislation has proven to be something of a success, according to BillShrink, the money-saving search engine.

"At a certain level, the CARD Act achieved its high-level objectives," Schwark Satyavolu, BillShrink's CEO and co-founder, told WalletPop in a telephone interview. "Banks ran up rates to 30% in some cases beforehand, but after the act [passed], rates only moved 2% to 3%. It achieved its broad object of making rates more stable."Another success: Americans are saving more or doing more to pay down their debt. After studying 116,000 users and tracking more than 220 credit cards, BillShrink found that the average user carries a credit card balance of under $7,000 these days, a decrease of 4% from last year's debt figures. It also found that 65% of consumers were paying off their credit card balances in full in January 2011, compared to 58% in January 2010.

"Part of this is the economy -- people are nervous about their jobs -- but it's also partly because of one of the provisions of the CARD Act, which requires credit card companies to show you how long you'll have to pay off your debt," explained Satyavolu. "Provisions like these have made an impact on consumer behavior."

On the flip side, to make up for revenues lost after the CARD Act went into effect, banks have hiked up fees, turned to reward cards with an annual fee, and are trying to find more ways to lure consumers who do pay their balances on time. And if you're a student or someone who really can't afford to have a credit card, becoming a card-carrying member of the credit culture has become even more difficult as you are perceived as too risky an investment.

The industry is also in so much flux these days, said Satyavolu, "it's hard to figure out exactly what to do. The fundamentals and how to manage credit has changed. Consolidating all debt used to be the best way to handle debt. Now, you're dealing with a compressed credit line. That means if you're carrying $5,000 on a card that had a $20,000 credit line that's been reduced to $5,000, you can impact your credit score negatively [due to utilization ratios]. Finding a different credit line that can give you more in order to lower your credit utilization is more important that ever."

Instead of credit cards, the battlefield in 2011 will be checking accounts, Satyavolu predicted. July is when the Durbin Amendment is suppose to take effect, which limits the amount merchants can be charged by banks for each debit transaction. The resulting, predicted $25 billion shortfall will mean banks will stop offering free checking.

And expect even more fees, he warned. There's no way banks will sit idly by and just watch their revenues evaporate. Instead, they'll get even more creative with the fees they charge and benefits they offer in order to generate both funds and new customers.
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