CARD Act Hurts Consumers, Helps Credit Card Companies

Government screwed credit card customers, enriched banks through the CARD Act.

Ronald Regan warned about the scariest words Americans could ever hear: “I’m from the government and I’m here to help.” Millions of Americans felt that terror when Barack Obama and the United States Congress promised to protect consumers from evil credit card companies. Politicians claimed kudos for themselves when the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act became law, and some Americans actually believed the law would help reduce the costs associated with carrying credit cards. On the second anniversary of the CARD Act, consumers now know the law has cost them billions of dollars. CardRatings.com recently reported on this unexpected result.

Protections for consumers with poor credit contained in the CARD Act failed to accomplish anything because credit card companies found ways to skirt the new rules and actually raise fees for that market segment. Although customers with credit problems faced the highest rate increases, practically all credit card holders faced steep increases in interest rates. Thanks to the CARD Act, consumers paid a total of almost $17 billion more in interest than they would have if Obama and the Congress did nothing. Balance transfer fees have also skyrocketed by more than 50 percent, and credit cards with limits on their transfer fees have almost vanished. This means consumers now pay more in fees every time they transfer a balance from one card to another.

According to Fox News, good news also came from the CardRatings.com report. The new 3-week window to pay credit card bills has saved consumers an estimated $5 billion annually, and over-limit fees have also became fewer in number and lower in cost. Despite a modest benefit, the CARD Act has become a windfall for credit card companies that have already earned an extra $12 billion as a result of the law. The CARD Act serves as yet another confirmation of the wisdom of Ronald Reagan. When the government starts protecting a group of people, that group of people should brace itself for a rough road ahead.