Last May, the Federal Reserve proposed sweeping new credit card regulations. The regulations, aimed at helping consumers, may in fact have a measured negative impact instead. How could a consumer-centric initiative backfire? By limiting the ability of credit card companies to offer 0% APR balance transfers, among other things.
The issue lay in one of the main initiatives: prohibiting banks from repricing pre-existing credit card balances. Why this may sound like a good thing, Discover’s (DFS) CEO was asked if the availability of balance transfers would be effected by the new regulations. His response was sobering, as he stated the new regulations, “would and could change how we execute balance transfer offers.” When asked if this would be an industry wide issue, he quickly responded, “certainly.”
Repricing current balances allows banks to manage risk, particularly the risk associated with extended generous 0% APR deals. However, should the proposed changes to the the Federal Reserve Board’s Regulation AA (Unfair or Deceptive Acts or Practices), the ability for consumer who lack the highest credit scores to get a 0% balance transfer may be hindered.
With many expecting this legislation to clear before year’s end, and that little credit crunch issue still lingering, this is not the time to be sitting on the sidelines piling up interest expense. Take control of your finances with a 0% APR balance transfer soon, as you may not be able to do so later.
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